In todays video we will talk about the Bank of England’s forecast that the Coronavirus epidemic will push the UK economy into its deepest recession in 300 years and their decision not to provide any new stimulus right away.
Okay hello and welcome back to patrick boyle on finance so in today’s video we’re going to talk about the bank of england’s forecast stating that the coronavirus epidemic is likely to push the uk economy into its deepest recession in 300 years and their decision not to provide any new stimulus right away okay so the bank of england in its monetary policy report
This morning put forth their predictions for the uk economy they suggest that output has fallen 3% in the first quarter and that there’ll be a 25 percent drop in output in the second quarter which compounds out to an almost 30 percent drop in the first half of 2020 that would be the fastest and deepest recession on record since the great frost in 1709 now the great
Frost of 1709 so three months of deadly cold that led to a year of famine and food riots in europe so quite a significant event everything turned to ice lakes and rivers and seas froze the soil froze to a depth of about a meter or more livestock died from cold in their barns and travellers froze to death on their road so you know that is a rather significant type
Of event that this is being compared to now the last time that we’ve had an annual drop in real gdp of more than four and a half percent was in 1945 and the last time we’ve had a drop in real gdp of greater than 10 percent was three hundred years ago in 1709 a bit bit over 300 years ago these economic projections came with a warning to britain’s banks that if they
Tried to stem losses by restricting lending that they would only make the situation worse andrew bailey the bank of england governor said that a failure to lend would create a vicious cycle of more bankruptcies and higher losses on loans that would come back to hit the bank themselves mr. bailey said that the better path for banks is to keep on lending if the
System ensures a good supply of loans that will get a better outcome so that’s kind of the statement from the bank of england commercial banks responded to this announcement by saying that they were committed to lending throughout the crisis the bank of england in addition warned that even with adequate lending the economy was bound to take a big hit household
Spending has already dropped by about 30 percent since early march in addition the central bank forecast that the uk’s employment rate was likely to rise to 9% by next year even with the government’s job retention scheme in place which is protecting many employees from being laid off that would mean a higher rate of joblessness than after the 2008 credit crunch
They forecast that inflation would dip to half of a percent in 2021 before returning to the 2% per year target that they have the following year on a more positive note mr. baily said that the economic rebound was likely to happen much more rapidly than the pull back from the global financial crisis and that they assumed long-term damage to the economy would be
Only one and a half percent of gdp coming from missed business investment in 2020 otherwise the prediction is for a v-shaped recovery baily defended the decision not to take more immediate action saying that the measures announced in march had still not been fully exhausted and that they’ve made a very clear commitment to do whatever it takes to support the economy
Consistent with their inflation target all monetary policy committee members agreed that more stimulus might be needed in the future and the central bank is signaling that more quantitative easing is in the pipeline the bank of england in addition analyzed if the financial system could cope with this type of recession with the session that they are predicting and
They said that banks will lose less money than in their latest stress test and that the core banking system does have capital buffers that are more than sufficient to absorb losses the bank of england did stress that the pandemic would severely hit corporate cash flow government support would plug some of the gap but there remains a sixty billion dollar additional
Deficit that banks would need to cover in order to stop viable businesses from going under the central bank warned that if banks failed to provide credit to their business customers that they might see a short-term benefit in reduced losses but this would just cause more companies to fail unemployment to rise another two percent ultimately leading to larger losses
Overall so that’s it for today’s video you made it to the end so you do have to hit the like button please hit the subscribe and the bell buttons if you’d like to be new notified of new videos as they come out let me know what you think of the bank of england’s announcements and predictions in the comment section below and see you again soon in another video bye you
Transcribed from video
The UK To Enter The Worst Recession for Over 300 Years According to The Bank Of England. By Patrick Boyle