FEARS over the potential financial and economic consequences of Coronavirus are now being realised and becoming more evident as the weeks unfold. Stock markets across the world have seen stormy weather over the last three months.
Since March more than 26 million people in the USA have filed for unemployment and there has been a historic decline in business activity and consumer confidence. All of which is greatly exercising President Trump in election year. Forecasters are expecting economic growth to contact by up to 30% in the three month quarter to June despite trillions of dollars being pumped into the economy.
So it’s little wonder that Donald Trump has been exhorting the individual states to practically ignore the lockdown and open up the country and the economy. This despite over 110,000 deaths – the highest in the world. Indeed there is evidence emerging that a ‘second spike’ is already happening in the United States due to the easing of the lockdown with many states reporting increased death rates
The situation is also bad across Europe. A recently published OECD report forecasts double-figure decrease in economic activity in the EU with escalating unemployment already happening. The report sees little recovery in the coming year as the world grapples with the pandemic and its consequences.
The report also forecasts a slump in GDP for 2020-21 of 11.5% in the UK, exceeding falls by France, Italy, Spain and Germany.
That fear became a reality today when the ONS reported that the UK economy shrank by 20.4% in April – the largest monthly contraction on record.
The Office for National Statistics (ONS) said the “historic” fall affected virtually all areas of economic activity.
The contraction is devastating. It is three times greater than the decline seen during the whole of the 2008 to 2009 economic downturn.
Analysts now hope that April will be the worst month, as the government began easing the lockdown in May.
The ONS also published figures for the period February to April, which showed a decline of 10.4% compared with the previous three-month period.
Most areas of the economy were severely hit, with pubs, education, health, car sales and housebuilding all giving the biggest contributions to this historic fall.
The government will now come under even greater pressure from Tory MPs to ease the lockdown more quickly rather than the current step by step more cautious approach hitherto undertaken for fears that coronavirus is far from beaten and could result in the feared second spike.
It is also to be expected that Boris Johnston’s government will come under considerable pressure to consider introducing similar economic rescue packages to those in Europe.
Germany, for example, has cut VAT and offered billions in a package to help families with children and purchasers of green cars. France is offering huge rescue funds to the car and aerospace industry.
There is no question that the various unprecedented jobs schemes have hitherto helped to will protect livelihoods. It was announced today that over 400,000 individuals have received such support in Wales and 25,000 of them have been in Carmarthenshire.
The question some may be asking now is, will it turn into a depression whose effects are much more severe?
Should this unprecedented and severe economic downturn last several more months the implications for the Welsh economy will be of great concern. It could well be a situation that will be with us for a couple of years – if not longer. It is a situation that may be felt across the UK by businesses and families. The current furlough and other support schemes for businesses and individuals may not be adequate to cope with what may lie ahead. Only time will tell