Instagram Live Catch Up: Talking About The Economy with Joseph Oyegoke
This week's BYP Blog is a guest article from Joseph Oyegoke. Joseph Oyegoke currently works as an Economist at the Office for Budget Responsibility, where he's worked on a range of topic areas including the recently announced policy package at Budget 2020, as well as the macroeconomic impacts of Brexit and the fiscal impacts of Shadow Banking in the UK.
Several weeks ago, I discussed with Kike the likely impact of the Coronavirus pandemic on the UK economy. I also defined some technical terms often mentioned in the media and highlighted what the economic impacts may mean for you. Here is a summary of the discussion.
How will the pandemic affect the economy?
I said a while ago on the Instagram live that I think it is highly likely that the UK will enter a recession (in technical terms, a recession is two consecutive quarters of negative economic growth). That view is now the consensus. The question that is currently being debated is whether the downturn will be ‘V’-shaped, ‘U’-shaped, or ‘L’-shaped. ‘V’ indicates a quick rebound after the recession to normal levels of growth. ‘U’ signifies a more protracted downturn before a recovery. ‘L’ suggests an impaired recovery with lasting damage having been done to the economy.
How to make sense of all that is going on?
Robert Chote (chairman at the Office for Budget Responsibility) was recently quoted as saying that now is not the time for the Government to be ‘squeamish’ about public debt, as the UK is facing a ‘wartime scenario’ to fight the economic hit brought on by the Coronavirus. The war analogy is
helpful because it shows how the country must pool all its resources into getting through this crisis. To fight this war the UK will primarily be using two economic tools:
The first is Fiscal policy. This involves changes to government spending and tax policies to influence economic conditions, such as economic growth or employment. So, an example of this could be increasing spending on the NHS.
The second is Monetary policy. This is where a country’s central bank (for us, the Bank of England) uses tools such as changes to interest rates and printing money (i.e. Quantitative easing) to influence how much money is in the economy and how much it costs to borrow. This impacts things such as how much income you have available to spend.
What help is available?
The Government has announced a wide range of schemes. Some of the primary aims are to prevent consumer demand from plummeting by putting money into the hands of workers (e.g. furlough scheme) and to prop up supply by keeping businesses running (e.g. Bounce-back loans for small
firms). New welfare measures have also been announced. That said, unfortunately some policies may only serve to reinforce existing inequalities in society – specifically for the black community. So, there is more work that needs to be done.
Joseph Oyegoke is an Economist who currently works for the Office for Budget Responsibility. He has worked on a range of topic areas, such as the current Coronavirus policy package, in addition to analysing the macroeconomic and fiscal impacts of past Budgets, Brexit and Shadow Banking. You can find him on LinkedIn. He is also an active member of The Black Economist Network (TBEN).