COVID-19 Impact: EU braces itself for 'recession of historic proportions' in 2020
Nations such as Italy, Spain, Greece and Croatia are expected to see their economies shrink by more than 9 percent in 2020.
The European Union is preparing itself to face a "recession of historic proportions" in 2020 in the wake of COVID-19 pandemic. EU’s economy chief Paolo Gentiloni said on May 6, 2020 that Europe is experiencing an economic shock without precedent since the Great Depression in 1930.
The coronavirus pandemic is expected to cause a 7.4 percent drop in the economic output. The sharp downturn could pose a great threat to the EU's single market and currency.
The EU economy chief stated that the situation is not only that the world is in a deep recession but it is also that the deep recession risks to cause different conditions and will have different consequences in different member states.
• According to the European Union Commission’s spring economic forecast, the Eurozone comprising 19 member nations will see a record decline of 7.7 percent.
• Nations such as Italy, Spain, Greece and Croatia are expected to see their economies shrink by more than 9 percent in 2020.
• The nations are heavily dependent on their tourism industry, which has been the hardest-hit with the announcement of nationwide lockdowns and suspension of air travel to contain the spread of coronavirus.
• Germany, which is referred to as Europe's economic powerhouse, is also set to see its GDP fall by 6.5 percent.
• Though the coronavirus outbreak is slowly coming under control and many EU member states have gradually started re-opening their economies, the almost 2-month lockdown has done its damage.
• The health crisis has not only impacted consumer spending, industrial output, investment, international trade, capital flows and supply chains but it has also resulted in millions being laid off their jobs.
• The unemployment rate in the 27-member EU group is predicted to rise from 6.7 percent in 2019 to 9 percent in 2020 and then fall again to around 8 percent in 2021.
• The EU, however, cautioned saying that the economic outlook is highly uncertain as of now and things could get even worse than the current projections.
• The commission has tentatively mapped out the scale and gravity of coronavirus impact on the economy.
When will the EU economy return to normal?
The EU Commission has predicted a rebound for the bloc’s economy in 2021. The bloc is expected to see economic growth of 6.1 percent next year. It would, however, still take time to return to normal.
The EU Commission stated that the bloc’s economy is not expected to fully make up for its losses by the end of 2021, as the labour market will not have completely recovered and investments will also remain subdued for a while.
Coronavirus to leave permanent scars?
According to the Commission, the coronavirus pandemic could leave "permanent scars" through bankruptcies and causing long-term damage to the labour market. It also noted that the young people entering the workforce at this time may find it harder to secure their first job.
V-shaped recovery not realistic: EU Commission
Economists warn that with the lockdowns being lifted slowly at varying levels in different EU member states, a V-shaped recovery might not be realistic. They stated that the nations are likely to see a spike in new cases as they start opening up and they may have to lockdown again until the new cases fall. Also, even if governments open up, people may not all feel comfortable about going out.
What will happen to Europe’s tourism industry?
The tourism industry of Europe’s tourism reliant economies are predicted to see a proportionately higher bounce back in 2021.
Overall, Europe is one of the worst affected regions with more than 1.1 million people being infected by COVID-19. At least 137,000 have died with the maximum deaths being reported from Italy Spain. The coronavirus testing, however, still remains limited, which means that the actual scale of the outbreak could be much bigger.
To save its economy, the European Union has agreed upon a €540-billion economic package to aid recovery efforts.