The economy could “easily” contract in the coming weeks by as much as it did in more than a year during the financial crisis, a senior forecaster has warned.
As ministers were being urged to do more to help businesses survive the coronavirus, Julian Jessop, an independent economist, said a 6pc drop in GDP or “even worse” in just one quarter can be expected.
Yep, sure, entirely possible.
And what matters is not that at all. What matters is what happens in the 3 months afterwards.
Recessions where we know what happened are less of a problem than those where we don’t. For, obviously enough, when the thing stops happening we can go back to doing stuff.
This is not just the wailing of some free marketeer either. Behold Simon Wren Lewis on the point.
This ‘direct’ impact of the pandemic will reduce GDP in that quarter by a few percentage points. The precise number will depend on what proportion of the population that get sick, on what the fatality rate in the UK turns out to be, and how many people miss work in an attempt not to get the disease. The impact on GDP for the whole year following the pandemic is much less at around 1% or 2%, partly because output after the pandemic quarter is higher as firms replenish diminished stocks and meet postponed demand.
BTW, there is no way to stop the slump happening. No combination of monetary and fiscal policy will do so. We’re at Canute and the tide here. It’s the recovery that matters.