EU 2020 GDP forecast revised down to -7.5%
By ECCT staff writers
The EU has revised down its official growth forecast for 2020 to account for the drop in economic activity from the coronavirus pandemic. According to a press release on the EU’s official website, Europa, the coronavirus pandemic represents a major shock for the global and EU economies, with very severe socio-economic consequences. Despite the swift and comprehensive policy response at both EU and national level, the EU economy will experience a recession of historic proportions this year.
According to the press release, the Spring 2020 Economic Forecast projects that the euro area economy will contract by a record 7.75% in 2020 and grow by 6.25% in 2021. The EU economy is forecast to contract by 7.5% in 2020 and grow by around 6% in 2021. Growth projections for the EU and euro area have been revised down by around nine percentage points compared to the Autumn 2019 Economic Forecast.
The shock to the EU economy is symmetric in that the pandemic has hit all member states, but both the drop in output in 2020 (from -4.5% in Poland to -9.75% in Greece) and the strength of the rebound in 2021 are set to differ markedly. Each member state's economic recovery will depend not only on the evolution of the pandemic in that country, but also on the structure of their economies and their capacity to respond with stabilising policies. Given the interdependence of EU economies, the dynamics of the recovery in each member state will also affect the strength of the recovery of other member states.
The coronavirus pandemic has severely affected consumer spending, industrial output, investment, trade, capital flows and supply chains. The expected progressive easing of containment measures should set the stage for a recovery. However, the EU economy is not expected to have fully made up for this year's losses by the end of 2021. Investment will remain subdued and the labour market will not have completely recovered.
The continued effectiveness of EU and national policy measures to respond to the crisis will be crucial to limit the economic damage and facilitate a swift, robust recovery to set the economies on the path of sustainable and inclusive growth.
In addition, the press release said that the unemployment rate in the euro area is forecast to rise from 7.5% in 2019 to 9.5% in 2020 before declining again to 8.5% in 2021. In the EU, the unemployment rate is forecast to rise from 6.7% in 2019 to 9% in 2020 and then fall to around 8% in 2021.