EU forecasts ‘recession of historic proportions’ this year

BRUSSELS: The European Union predicted Wednesday "a recession of historic proportions this year" due to the impact of the Coronavirus with a drop in output of more than 7 per cent, as it released its first official forecast of the damage the pandemic is inflicting on the bloc's economy.

The 27-nation EU economy is predicted to contract by 7.5 per cent this year, before growing by about 6 per cent in 2021.

The group of 19 nations using the euro as their currency will see a record decline of 7.75 per cent this year, and grow by 6.25 per cent in 2021, the European Commission said in its Spring economic forecast.

"Europe is experiencing an economic shock without precedent since the Great Depression," EU Economy Commissioner Paolo Gentiloni said in a statement.

More than 1.1 million people have contracted the virus across Europe and over 137,000 have died, according to the European Centre for Disease Prevention and Control. Unclear outbreak data, low testing rates and the strain on health care systems mean the true scale of the pandemic is much greater.

With the spread slowing in most European countries, people are cautiously venturing out from confinement and gradually returning to work, but strict health measures remain in place amid concern of a second wave of outbreaks and any return to something like normal life is at least months away.

The pandemic has hurt consumer spending, industrial output, investment, trade, capital flows and supply chains. It has also hit jobs. 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, the commission said.