The European economy will face a “deeper recession” than previously predicted due to the prolonged containment measures on the COVID-19 pandemic, the European Commission said in its “Summer 2020 Economic Forecast” on Tuesday.
The 19-member eurozone economy is projected to contract by about 8.75 percent in 2020 before recovering at an annual growth rate of 6 percent next year, said the Commission.
The 27-member European Union (EU) economy is forecast to contract by 8.3 percent in 2020 and grow by 5.8 percent in 2021, it said.
Compared with the spring forecast published in May, the summer one’s projections on economic contraction in 2020 are somewhat dimmer and recovery in 2021 slower.
In its spring forecast, the Commission projected that the eurozone economy would contract by 7.75 percent in 2020 and grow by 6.25 percent in 2021, and the EU economy was forecast to contract by 7.5 percent in 2020 and grow by around six percent in 2021.
With a far longer period of disruption and lockdown taking place in the second quarter of 2020, economic output is expected to have contracted significantly more than in the first quarter, said the Commission.
Early figures for May and June have suggested that “the worst may have passed,” and recovery is expected to gain traction in the second half of the year, it added.
However, the hit to the economy was so strong that the partial rebound in the second half of the year will not be able to lift the annual growth rate significantly, said Paolo Gentiloni, EU commissioner for the economy.
“The chart shows how far we will have to move away from the growth path that we had expected before the pandemic occurred,” he told the press on Tuesday.
According to Gentiloni, a similar trend was observed in the world economy (excluding the EU). In the first quarter of 2020, the world economy outside the EU is estimated to have contracted by more than three percent quarter-on-quarter, partly because of the impact of the anti-virus measures taken by China in the first three months. In the second quarter, the world’s output declined much deeper owing to the global COVID-19 pandemic.
“The still rising daily infections at global level do not bode well for the world economy,” said the commissioner, who predicted a decline in the overall real global gross domestic product (GDP), excluding the EU, of around four percent in 2020 and a five-percent recovery in 2021. Enditem