United Kingdom is in the first row among the economy fall into financial crisis countries due to the COVID-19 pandemic. This country economy shrank 20.4 percent in the second quarter of this year.
Although it has turned around a bit since July this year, the pace is so slow that researchers think it will not be able to protect the economy. At the same time, the government’s borrowing has increased, taking the debt situation to record highs.
A study by the Institute for Fiscal Studies (IFS), one of the country’s leading research institutes, says UK government borrowing will reach a level not seen before this year. The agency says the needed to increase the income needs of employment, businesses and individuals to keep the economy afloat.
The UK government has given about $200 billion of incentives to the economy for this. However, due to this, a large income tax increase will be inevitable in the future.
The United Kindom government borrows from global investors and the Bank of England to provide services to the public to protect the economy crisis. Later they tried to maintain their balance through taxes. The agency says the economy will shrink by 5 percent from what was expected in March 2014-25 this year. At the same time, the debt burden of the government will increase a lot.
Analysts say economic balance will be maintained at all times, even if the government promises it will not be possible. This year, the government’s annual borrowing will go back to World War II. The national debt will be bigger than the economy. By 2025, debt will reach 110 percent of GDP. However, IFS also warned that now is not the time to raise taxes or reduce spending.
New Brexit trade barriers with the European Union, as well as economic assistance due to the epidemic, are needed. For now, interest rates on government loans are low.
Due to the coronavirus epidemic in August this year for the first time, the UK’s debt has exceeded $2 trillion. From July last year to July this year, the debt added £227.6 billion. In July alone, the government borrowed £26.7 billion.
United Kingdom finance minister Rishi Sunak said, “The ongoing economy crisis has put pressure on public activity. This has hit our economy hard. Necessary measures have been taken for millions of jobs, businesses and livelihoods.
Earlier last month, the IFS study said, On average the average annual wage of people in the UK has dropped by at least £800 compared to a decade ago. That’s why analysts have called it a lost decade.