The growth rate of the Ƶ economy is expected to slow sharply as a result of the impact of the coronavirus, according to the latest forecast by the BritishChambersofCommerce(BCC).
The business membership body has cut its growth forecast for the economy in 2020 from its previous 1% position to just 0.8%
Outside of the 2008/09 financial crisis, this wouldbe the weakest full-year growth outturn since 1992anddown sharply fromƵGDP growth of 1.4% in 2019.
BCC said that gross domestic product growthis then expected to be 1.4% in 2021 and 1.6% in 2022.
Its forecast indicates that by the end of 2022, the Ƶ economy will have grown below its historic average growth rate of 2.6% for eight successive years, the longest period since records began.
The disruptive impact ofcoronavirusis expected to weigh significantly on key drivers of Ƶ GDP growth through the first half of 2020.
BBC said the lackofclarity on theƵ’sfuture trading relationshipwith the EU and other partners around the worldand a strugglingglobaleconomyis also predicted to limit Ƶ’s near-term growth prospects:
Ƶ export growth in 2020 is projected to be its weakest since 2009as a subdued global economy, the impact ofcoronavirusand uncertainty over future trading arrangementsconstrainexport activity.
Business investment is expected to contractby 0.7%this year asthe impact ofcoronavirus,the cost of doing business in the Ƶand a lackofclarity on the future tradingconditionslimit investment intentions.
Growth household spending in 2020 is predicted to be at its slowest since 2011, as the effect ofcoronavirustemporarilyweakens consumer demand, despite historically low unemployment.
On the upside, historically strong levels of Ƶ and Welsh Government spending - both observed in Budget2020and anticipated in the upcoming Spending Review and Autumn Budget–are expected tosupport the Ƶ economy through the forecast period.
The measures announced by theBank of England, includingloweringinterest ratesand steps to support business access to finance,willalso helpmitigatesome ofthe impact of the coronavirus on the Ƶ economy.
Suren Thiru, head of economics at the BCC said: “Our latestforecastindicates that the Ƶ economyfaces a challenging short-term outlook.
“It is increasingly likely that the boost from higher government spending and morepoliticalcertainty, will be surpassed over the near-term by the negative impact ofcoronaviruson the Ƶeconomy.
“Although the scale and impact ofcoronavirusremains highly uncertain,early evidence ofdisruption to supply chains and weakeninginconsumerdemandand business activitycould mean that even in the case ofatemporary shock to the economy, there may be somelong-term impact oneconomic output – particularly if significant action is needed to combat its spread.
“Failure to achieve aƵ-EUarrangementconduciveto tradeis also a keyriskto the outlook for the Ƶ economy as disruptioninearly 2021could adverselyaffecteconomic conditions.”
Adam Marshall, director general of the BritishChambersofCommerce, added: "Coronavirus could further weaken an already stagnant Ƶ economy, as many businesses are starting to report an impact on their cashflow and growth prospects."
“The Chancellorand the Bank of England haveresponded to the immediate challenge with measures to help firms hit by coronavirus,andtheymust now ensure this supportgets tobusinessesas quickly as possible.
“More will need to be done later in the year to boost business confidence and tackle prolonged economic stagnation. Securing new trading arrangements, taking real action to reducethehigh upfront costsof doing businessand putting spades in the ground on long-overdue infrastructure projects must be prioritised in order to secure our long-term economicprospects."
