UK GDP to decline by 2.6% in 2020, projects KPMG

03 Apr '20

2 min read

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UK gross domestic product (GDP) would decline by 2.6 per cent in 2020, assuming the COVID-19 pandemic can be contained by this summer, with a sharp recovery in the first half of 2021 as uncertainties around the pandemic dissipate, KPMG said in its latest UK quarterly Economic Outlook. A more enduring outbreak could prompt a fall of 5.4 per cent this year, it said.

Consumer spending and business investment will be particularly hard hit due to COVID-19 related disruptions and uncertainty, it said in a press release.

It projected flat growth in the second half of this year, but a sharp recovery in the first half of 2021, with UK GDP growth of 1.7 per cent in 2021.

A protracted outbreak could result in a more severe impact than the downturn experienced in 2008-09. The economy is expected to recover by the second half of 2021 at the latest under both scenarios.

KPMG’s main scenario assumes the public health measures put in place around the world stem the rise in the number of cases by the summer. In this case, it is expected that the economy remains flat in the second half of the year with a strong recovery in the first half of 2021, as uncertainties around the pandemic dispel. This would see UK GDP fall by 2.6 per cent this year, then grow by 1.7 per cent in 2021.

However, if the pandemic persists until the second half of next year, GDP could contract by 5.4 per cent this year and by another 1.4 per cent in 2021, it said.

The effects of the pandemic on global economic growth, consumer spending and business investment in particular, will still be highly significant.

Fibre2Fashion News Desk (DS)

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