UK Recovery Set to Be Sluggish
Every country has been affected by the coronavirus pandemic in one way or another. Even New Zealand, which has become a model of success in keeping cases to a minimum, is financially challenged, as their tourism industry suffers from the temporary ban on international travel. As for the UK, the economic damage is even bigger, as it is one of the top 20 countries with the highest number of COVID-19 cases. And it looks like the economy is set for a slow recovery.
According to forecasts from KPMG, a leading multinational professional services firm, it’s unlikely that the UK will regain its economic standing from before the pandemic hit until early 2023. That sets an almost three-year timeline to recover what was lost over two quarters. The firm reports that the economy will continue to decline by 10.3% for 2020 — or 12.6%, if a new wave of COVID-19 cases results in a month-long lockdown. Furthermore, KPMG’s forecast for economic recovery by 2023 depends on the development of a vaccine. If a vaccine is approved and rolled out by April 2021, the economy is expected to pick up by 8.4%. However, a three-month delay in rolling out a vaccine can result in a lower growth rate of 7.1%.
It should be noted, however, that the economy was already in decline before the first signs of an outbreak were reported. The Guardian reports that the UK’s GDP had a measly 0.1% growth between December 2019 and February 2020. Growth in the services sector remained stagnant in those months, while manufacturing, one of the industries hit hardest by Brexit, reported a 0.5% growth in February. Furthermore, unpredictable weather has significantly reduced construction output, while lower volumes of imports from the EU continued to weaken the UK economy.
But trade relations aside, the UK is not the only European nation to take an economic hit. Industrial activity in France fell last month, while industrial activity in Germany and the Eurozone underperformed against analytical forecasts. To compare, the French economy is expected to recover from the pandemic by mid-2022 according to the Bank of France. Meanwhile, high hopes for Germany’s quick economic recovery were squashed as it only reported a 10.4% increase in industrial orders, a third less than what was expected. All in all, the economic recovery of most European nations is expected to be sluggish, too.
The rest of the world is also struggling to get back on its feet. An FXCM analysis on the global recession points out how the current uncertainty continues to plague economies, especially as there are concerns about second waves of the virus and its potential effects on industries. Already, many countries have released major fiscal stimulus packages, which governments hope will reinvigorate their own respective economies. In the US, for instance, the $3 trillion (£2.26 trillion) emergency relief bill has provided individual stimulus cheques worth $1,200 (£902.9), which gave Americans money to spend. This aims to keep the economy active amidst rising unemployment rates and falling incomes, in the hopes that the country can avoid a recession, or worse, a depression.
As the UK combats the negative consequences of the pandemic, bad weather, and Brexit, officials claim to have a plan to rebuild the economy. Boris Johnson promised a £5 billion deal to construct homes, healthcare infrastructure, road projects, and school buildings. Unfortunately, his recovery plan failed to mention providing more jobs to tackle unemployment.