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UK economy could be worst hit among leading nations, OECD warns

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Daily US Times: The Organisation for Economic Co-operation and Development (OECD) has warned that the UK economy is likely to be the hardest hit by Covid-19 among major economies among the rich nations.

It said the UK economy is likely to slump by 11.5% in 2020, slightly outstripping falls in countries such as Germany, France, Spain, and Italy.

If there were a second peak in the pandemic, the UK economy could contract by as much as 14%.

OECD warned that the crisis will cast a long shadow over the world. It said that in what it called a “single-hit scenario”, with no second peak, there could be contractions of 11.4% in France, 11.1% in Spain, 11.3% in Italy, and 6.6% in Germany.

The OECD found in its latest assesments that the UK’s largely service-based economy meant that it had been particularly badly hit by the government’s lockdown restrictions.

The services sector, including hospitality, tourism and financial services makes up about three-quarters of the UK’s GDP.

Chancellor Rishi Sunak said in response to the think tank’s report that the UK was not the only one to suffer.

“In common with many other economies around the world, we’re seeing the significant impact of coronavirus on our country and our economy,” Mr Sunak said.

“The unprecedented action we’ve taken to provide lifelines that help people and businesses through the economic disruption will ensure our economic recovery is as strong and as swift as possible,” he added.

Shadow chancellor Anneliese Dodds described the evidence from the OECD is ”deeply worrying”, adding that it shows the UK was particularly exposed when the coronavirus crisis hit.’

Source and credit: OECD and BBC

Global Impact

The OECD said in its report that the pandemic had started to ease in many countries and sign shows economy had begun to pick up, but it does not expect a convincing recovery. It considers the outlook for public health as extremely uncertain.

Laurence Boone, OECD’s chief economist, said the pandemic would have “dire and long-lasting consequences for people, firms and governments”.

“Extraordinary policies will be required to walk the tightrope towards recovery. Even if growth does surge in some sectors, overall activity will remain muted for a while,” she added.

The OECD looked at two scenarios for how the pandemic might unfold, depending on whether there is a second wave of contagion or not before the end of this year.

If that does happen, two countries – Spain and France – would suffer even deeper declines in economic activity than the UK this year.

You may read: Boris Johnson accepts ‘frustration’ over lockdown rules

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