Kate Andrews Kate Andrews

Oxford Economics predicts a quick post-virus recovery – with one big caveat

Credit: Getty

Britain is midway through a deep recession: of that there is no doubt. But what next? Oxford Economics has today been one of the first to offer an answer, predicting a V-shaped economic recovery (sharp economic downturn and sharp economic revival) and near-complete economic repair. It is, of course, a guess: all forecasts are. But it’s one worth looking into in a bit more detail. All published economic forecasts pre-Covid-19 (including those accompanying the Chancellor’s Budget last week) are defunct, so this is an early test – one that factors in the Government’s policy of ‘social distancing’ and the profound impact this has on business as usual.

Oxford Economics has replaced its estimate of modest GDP growth of one per cent to a prediction of a fall of 1.4 per cent. Short-term growth has been slashed, now estimated to fall by three per cent in H1. And economic volatility will be with us for a while longer, as the combination of public health advice, working parents now looking after school-age kids full-time, and further hits to service sectors all take their toll on the economy.

Screenshot_2020-03-20_at_15.19.37.png

Most pandemic modelling is about flu – but Covid-19 is not the flu


But unlike the 2007-08 crash, the economy here is crouching, on government instructions. Unlike during a normal downturn, we do not want people out and about, spending money and increasing economic activity; we want them out of restaurants, out of shops, keeping their distance from others. So the question is how high the economy is capable of standing later on, when things return to some level of normality. Oxford Economics says quite high: they forecast it will skyrocket with 3.7 per cent growth next year, returning to fairly familiar growth rates – albeit slightly higher – in 2022 and 2023.

Its base prediction: that between the monetary and fiscal stimulus on offer so far and historically low oil prices, Britain’s economy will have favourable conditions when it’s allowed to get up and running again.

Already a subscriber? Log in

Keep reading with a free trial

Subscribe and get your first month of online and app access for free. After that it’s just £1 a week.

There’s no commitment, you can cancel any time.

Or

Unlock more articles

REGISTER

Comments

Don't miss out

Join the conversation with other Spectator readers. Subscribe to leave a comment.

Already a subscriber? Log in