The central bank said Thursday that the British economy could shrink by 14% this year. That would be the biggest annual contraction since a decline of 15% in 1706, based on the bank's own best estimate of historical data.
The central bank expects a swift economic recovery in 2021, but it cautioned that its forecast, which assumes a gradual easing of social distancing measures and"very significant" monetary and fiscal stimulus, depends on the"evolution of the pandemic, and how governments, households and businesses respond."
"Current conditions are unprecedented in our lifetime and all forecasters are struggling to make out where the economy stands now, never mind what happens in future. But it is clear that the next few months are going to produce some of the biggest output falls on record," said Commerzbank economist Peter Dixon.
Some European countries have taken tentative steps to reopen their economies as the region is slammed by what EU officials describe as the worst economic shock since the Great Depression. The EU economy will shrink by a record 7.5% this year, the European Commission warned this week, and the drop could be even more precipitous across the 19 countries that use the euro.
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