Predictions for the Global and UK Economy

The IMF has recently released predictions for the economy. It predicts a 3% fall in global GDP in 2020 and a 6.5% fall in the UK:

The IMF is pessimistic about global recovery, apparently the economic recovery is beginning now, which is puzzling.

It is interesting that only a month ago, on the 3rd March, well after the outbreak had started, the OECD was predicting positive 2.4% growth for the world, it shows that economists live in a small bubble (by 26th March OECD predicted huge falls everywhere - 26% for UK Q2 on Q1). Notice that the IMF is highly positive about emerging and developing economies despite the fact that Africa, South Asia and Central/South America are about to experience the most appalling epidemics.

JP Morgan have three scenarios for the recovery in the USA:

They believe that a U shaped recovery is most probable but notice that their most pessimistic forecast is the standard forecast by the IMF.

The OBR predicts that the UK economy will rebound rapidly to wipe out losses:

The OBR report is truly upbeat and would be fantastic if it happens. The OBR points out that UK debt levels are sustainable:

Sadly I think the OBR is overoptimistic. Covid-19 will be bouncing round the world for the rest of this year and fear of a second wave of infections will slow our emergence from lockdown. There will be no armageddon but a U shaped curve is probably realistic for the UK economy and, if we are lucky, the UK will claw back two thirds of the lost growth in 2021.

Does anyone remember the absolute terror in the media at the UK economy possibly, and only possibly, suffering a 3% fall in GDP by 2030 relative to remaining if Brexit happened? Do you remember people tweeting about fearing that losing 3% of GDP compared with remaing over 12 years would absolutely ruin their lives. They said that even if the EU had downsides "leavers were threatening their financial security?" (by foregoing a little bit of growth). When something real like Covid-19 happens we can see that fear of Brexit was just media hysteria, Project Fear.

Here is the OBR summary of predictions for the UK economy:

These predictions are largely measures of how far the different pundits have come to terms with what a global pandemic actually means.

15/4/2020

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