The European Union is bracing itself for a “recession of historic proportions” this year, with the coronavirus pandemic expected to cause a 7.4 per cent drop in economic output.
“Europe is experiencing an economic shock without precedent since the Great Depression,” the EU’s economy chief Paolo Gentiloni said on Wednesday. He warned the sharp downturn poses a threat to the EU’s single currency and the single market.
The 19-nation Eurozone will see a record decline of 7.7 per cent this year, according to the Commission’s Spring economic forecast. Greece, Italy, Spain and Croatia are all set to see their economies shrink by more than 9 per cent in 2020. These are heavily reliant on tourism, a sector which has been pummelled by weeks of nationwide lockdowns and travel restrictions. Even Europe’s economic powerhouse Germany is set to see its GDP contract by 6.5 per cent.
The unemployment rate across the 27-nation EU is forecast to rise from 6.7 per cent in 2019 to 9 per cent in 2020 but then fall to around 8 per cent in 2021, according to the Commission. It cautions, however, that its outlook is highly uncertain – and things could be even worse than it’s projecting right now. The Commission forecasts the bloc will rebound next year with economic growth of 6.1 per cent, but it won’t be quite out of the woods then.It warned the pandemic could leave “permanent scars” through bankruptcies and long-term damage to the labour market.
The tourism reliant economies in Europe’s south are predicted to have a proportionately higher bounce back in 2021. But economists are warning that with lockdowns in Europe being lifted at varying levels and paces, a straightforward recession followed by recovery – a V shape – might not be realistic.
Source: Euro News
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