US, WASHINGTON (ORDO NEWS) — The UK Treasury is worried that this year’s budget deficit could reach a record 337 billion pounds ($ 414 billion) due to the coronavirus pandemic, The Daily Telegraph reports citing an internal document from the ministry.
In the worst case, if the economy does not recover, the deficit could grow to 517 billion pounds compared with the March forecast of only 55 billion pounds for 2020-2021.
Officials warned ministers that Britain could face a debt crisis if measures to stabilize the deficit were not taken, which would require £ 25-30 billion by raising taxes or cutting costs in the main scenario and $ 90 billion in the worst case scenario.
In the best case, with the so-called V-shaped economic recovery, the budget deficit could amount to 209 billion pounds. However, the document notes that a more realistic scenario is a longer U-shaped recovery. In the latter case, the deficit will be reduced to 83 billion pounds in 2021-2022 and to 32 billion by 2024-2025.
The document, which, according to the publication, was prepared for the Minister of Finance, Rishi Sunak, outlines the proposed package of measures to increase taxes and reduce costs. The Telegraph, citing an unnamed source in the Ministry of Finance, reports that no political decisions have been made.
The Bank of England predicts that in 2020 the UK economy will shrink by 14%, and in 2021 it will grow by 15%. This scenario is based on the assumption that the UK government will gradually lift restrictions imposed to combat COVID-19 from June to September. Such a scenario will require very significant monetary and fiscal incentives, the central bank said.
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