The European Commission’s spring forecast predicts the EU’s economy will this year slump by 7.4 percent before showing any signs of growth. But the report warns conditions could even worsen if governments are forced to extend their lockdowns Forecasters said every member state should expect their Gross Domestic Product to shrink by at least five percent.
They expect the UK’s GDP to fall back from 1.4 percent in 2019 to -8.3 percent this year.
Their report said: “Given the severity of this unprecedented worldwide shock, it is now quite clear that the EU has entered the deepest economic recession in its history.”
“Real-time data suggest that economic activity in Europe has dropped at an unusually fast speed over the last few weeks, as the containment measures triggered in response to the crisis by most member states in mid-March have put the economy into a state of hibernation.
“Economic output is thus set to collapse in the first half of 2020 with most of the contraction taking place in the second quarter. It is then expected to pick up, assuming that containment measures will be gradually lifted, that after these measures are loosened the pandemic remains under control, and that the unprecedented monetary and fiscal measures implemented by member states and the EU are effective at cushioning the immediate economic impact of the crisis as well as at limiting permanent damage to the economic tissue.”
Although Britain is expected to be hit financially harder by the coronavirus crisis, the country is expected to rebound in 2021, with growth of around six percent.
However, the bloc’s forecasters predicted the EU economy would see growth of around 6.1 percent.
They blame both Brexit and the Government’s efforts to halt the spread of the virus for the country’s poorer performance.
“UK GDP is expected to fall steeply in the first half of 2020, mostly due to the containment measures the UK government has implemented to combat the spread of COVID-19, before rebounding into 2021,” the report said.
“Private consumption is expected to fall sharply, before picking up again, while investment is expected to take longer to recover, due both to the lasting consequences of COVID-19 and continuing uncertainty about the UK’s future trading relations with the EU.”
Germany, the EU’s largest economy, is expected to be hit by the “deepest recession” since the Second World War, with its treasured automotive industry emerging as one of the main victims of the coronavirus pandemic.
Domestic and international demand for the country’s products have all been “squeezed” since the beginning of the crisis.
Forecasters said the German economy is going to shrink by 6.5 percent this year before rebounding in 2020.
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The report said: “In early 2020, German manufacturing had shown signs of recovery, but the COVID-19 pandemic and the confinement measures in March ended this.
“The economy is now set for the deepest recession since WWII. Activity is expected to recover in the second half of the year and thereafter, but to remain below normal for some time due to lingering limitations on social life and travel and impaired foreign trade.”
The Commission fears the economic woes could, however, continue much longer unless a vaccine is discovered or people develop an immunity to the virus.
Paolo Gentiloni, European Commissioner for the Economy, said: “Europe is experiencing an economic shock without precedent since the Great Depression.
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“Both the depth of the recession and the strength of recovery will be uneven, conditioned by the speed at which lockdowns can be lifted, the importance of services like tourism in each economy and by each country’s financial resources.
“Such divergence poses a threat to the single market and the euro area – yet it can be mitigated through decisive, joint European action.”
Commission vice-president Valdis Dombrovskis added: “At this stage, we can only tentatively map out the scale and gravity of the coronavirus shock to our economies.
“While the immediate fallout will be far more severe for the global economy than the financial crisis, the depth of the impact will depend on the evolution of the pandemic, our ability to safely restart economic activity and to rebound thereafter.
“This is a symmetric shock: all EU countries are affected and all are expected to have a recession this year. The EU and Member States have already agreed on extraordinary measures to mitigate the impact.”
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