The European Union is bracing itself for a “recession of historic proportions” this year, with the coronavirus pandemic expected to cause a 7.4 percent drop in economic output, EU Commissioner for Economy Paolo Gentiloni warned while presenting the European Commission’s Spring economic forecast.
“Europe is experiencing an economic shock without precedent since the Great Depression,” Gentiloni said, warning that the sharp downturn poses a threat to the EU’s single currency and the single market.
“The situation is not only that we are in a deep recession, yes we are, but the situation is that this deep recession risks to cause different conditions and have different consequences in different member states,” Gentiloni said.
The EU’s spring forecast also showed that the 19-nation Eurozone will see a record decline of 7.7 percent this year.
The countries most heavily relying on tourism, which include Greece, Italy, Spain and Croatia, are all set to see their economies shrink by more than 9 percent in 2020. The EU’s largest economy, Germany, is expected to shrink by 6.5 percent.
Among the countries of the Visegrád Group, Poland is expected to fare the best with a contraction of only 4.3 percent, with the Czech Republic down 6.2 percent, Hungary 7 percent, and Slovakia 6.7 percent.
The unemployment rate across the 27-nation EU is forecast to rise from 6.7 percent in 2019 to 9 percent in 2020 but then fall to around 8 percent in 2021, according to the Commission.
It cautions, however, that its outlook is highly uncertain and the situation could be even worse than it’s projecting right now.
“At this stage, we can only tentatively map out the scale and gravity of the coronavirus shock to our economies,” said EU Commission Vice-President Valdis Dombrovskis.
Forecasts show that 2021 is expected to bring a recovery of about 6.1 percent, but even that will not mean business as usual.
“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 labor market will not have completely recovered,” the Commission said in its statement.
It warned the pandemic could leave “permanent scars” through bankruptcies and long-term damage to the labor market.
Title image: European Union Commissioner for Economy Paolo Gentiloni presenting the Commission’s Spring economic forecast. (source: Youtube)