European Union 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 as it released its first official estimates of the damage the pandemic is inflicting on the bloc’s economy.
The 27-nation EU economy is predicted to contract by 7.5% this year, before growing about 6% in 2021, assuming countries steadily ease their lockdowns.
The group of 19 nations using the euro as their currency will see a record decline of 7.75% this year, and grow by 6.25% in 2021, the European Commission said in its Spring economic forecast.
“It is now quite clear that the EU has entered the deepest economic recession in its history,” EU
Economy Commissioner Paolo Gentiloni told reporters in Brussels. As the virus hit, “economic activity in the EU dropped by around one third practically overnight,” he said.
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% last year to 9% in 2020 but then fall to around 8% in 2021, the commission said. Beyond that, Gentiloni said, “we will have a massive drop in hours worked.”
Globally, the pandemic is expected to cause the deepest recession in living memory, with the International Monetary Fund forecasting a 3% decline this year. The UN says that is expected to cause a drop in work hours equivalent to 305 million full-time jobs.