COVID-19: Steepening cost to eurozone and UK economies

‘Risks to our forecast are skewed to the downside’

LONDON, March 30: The economic costs of the coronavirus pandemic for Europe are mounting quickly as measures to contain the virus increase, both in Europe and abroad, S&P Global Ratings said in a report.

“The eurozone and UK economies are now facing a recession of -2% for 2020,” said S&P Global Ratings Senior Economist Marion Amiot, in the latest European economic forecast published today, “COVID-19: The Steepening Cost To The Eurozone And UK Economies.”

The relatively swift recovery that we expect to start in the second half of 2020 will still take time, as job losses and uncertainty will slow the return to previous levels of consumption, investment, and trade.

“Risks to our forecast are skewed to the downside: The pandemic might last longer and be more widespread than we currently envisage. The size and kind of policy responses countries take now are key to avoiding permanent economic damage later,” S&P Global Ratings’ EMEA Chief Economist Sylvain Broyer said.

Most of the multiple shocks to the European economy are growing, such as the shock to demand, both internal and external, and the shock to supply. And then, there is the shock to confidence from a sharp tightening in financial conditions and uncertainty about the length of isolation measures.

Only monetary conditions have stabilized since our last assessment (see “Disorderly Appreciation Of The Euro Might Inflict LongerLasting Economic Harm Than COVID-19,” March 13, 2020).

S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak around midyear, and we are using this assumption in assessing the economic and credit implications. In our view, the measures adopted to contain COVID-90 have pushed the global economy into recession and could cause a surge of defaults among nonfinancial corporate borrowers (see our macroeconomic and credit updates here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

This report does not constitute a rating action.

In this file photo, American Airlines jets sit idly at their gates as a jet arrives at Sky Harbor International Airport in

Phoenix. (AP)