Bank of England Forecasts 14% GDP Decline This Year... Base Interest Rate Remains Unchanged

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The Bank of England (BOE) forecasted on the 7th that the United Kingdom's gross domestic product (GDP) will decrease by 14% this year due to the COVID-19 pandemic. It predicted that the GDP decline could reach 25% as the shock from COVID-19 is concentrated in the second quarter.

According to Bloomberg News and others, the BOE announced this in its financial stability report on the same day. The BOE stated, "The spread of COVID-19 and the measures to contain it have caused significant shocks to the UK and many countries worldwide," adding, "Since early this year, economic activity has sharply declined and unemployment has noticeably increased." The BOE also said it is prepared to implement additional easing if necessary.

This year, the unemployment rate is expected to rise to 8%, and inflation is projected to be around 0.6%. Investment in the UK is anticipated to decrease by 26% during the year, and private consumption expenditure is expected to drop by 14%.

However, the BOE forecasted that GDP will increase by 15% next year. Andrew Bailey, Governor of the BOE, predicted that "the scars on the economy will be limited" because he expects the government's stimulus measures to be successful.

The BOE also announced the results of the monetary policy meeting held the day before. It decided to keep the base interest rate at the current 0.1% and maintain the asset purchase program size at around 645 billion pounds. Among the nine monetary policy committee members, two expressed a minority opinion that the asset purchase size should be increased by 100 billion pounds.

The BOE stated that it is currently conducting tests to determine whether the financial system can respond to the economic recession. It expects cash losses to be less than those in recent stress tests conducted on banks and assessed that the core banking system holds sufficient capital to absorb losses.

According to Johns Hopkins University in the United States, the number of confirmed COVID-19 cases in the UK was recorded at 202,359 on the day. The death toll has surpassed 30,000, ranking second in the world after the United States and first in Europe.

This content was produced with the assistance of AI translation services.