(Alliance News) - UK Chancellor Rishi Sunak on Wednesday said the government was providing GBP280 billion this year to help the country get through the coronavirus crisis, as the budget watchdog forecast a sharp economic contraction for 2020.
The Office for Budget Responsibility has forecast that the UK economy will contract by 11.3% this year. This would be "the largest fall in output for more than 300 years", Sunak said.
In 2021, the economy should rebound 5.5%, and grow an even-stronger 6.6% in 2022. In 2023, the bounce-back is expected to ease to 2.3%.
"Even with growth returning, our economic output is not expected to return to pre-crisis levels until the fourth quarter of 2022," said Sunak, warning that the economic damage is likely to be "lasting".
He added: "Long-term scarring means, in 2025, the economy will be around 3% smaller than expected in the March budget."
The OBR forecasts the UK will borrow GBP394 billion this year, equivalent to 19% of GDP and the highest level of borrowing in the country's peacetime history.
Borrowing should fall to GBP164 billion in 2021.
Sunak also said the OBR predicts unemployment will hit a peak of 7.5%, or 2.6 million people, in the second quarter of 2021. The jobless rate is then expected to fall to 4.4% by the end of 2024.
The chancellor unveiled GBP3 billion for a new three-year 'restart programme' to help people out of work find jobs. Sunak said also that the government would increase the national living wage by 2.2% to GBP8.91 an hour.
By Lucy Heming; lucyheming@alliancenews.com
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