Italy, Greece, Spain and Portugal will be among the hardest-hit by the economic effects of the pandemic, while Luxembourg, Malta and Austria are to weather the shock better.
Following the humongous economic effects of Covid-19, the European Union has predicted that the world, especially countries in Europe, will battle a recession of historic proportions.
While reporting its first official forecast of the economic damage of the pandemic, EU disclosed that the 27-nation EU economy will contract by 7.5 percent this year, before growing by about 6 percent in 2021.
“Europe is experiencing an economic shock without precedent since the Great Depression,” EU Economy Commissioner Paolo Gentiloni said in a statement.
“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,” he added.
In most European countries, people could no longer bear the lockdown. They are struggling to resume businesses.
Health officials have however warned against violation of preventive measures in order to avoid a second wave of outbreaks.
It is an established fact that the pandemic has impacted consumer spending, industrial output, investment, trade, capital flows and supply chains.
Italy, Greece, Spain and Portugal will be among the hardest-hit by the economic effects of the pandemic, while Luxembourg, Malta and Austria are to weather the shock better.
Greek GDP is to contract the most, by 9.7 percent, with Italy recording the second-deepest recession of 9.5 percent and Spain 9.4 percent.
Italy, the EU country hardest hit by the coronavirus, will see its budget deficit surge the most, to 11.1 percent of GDP this year from 1.6 percent last year, but it will fall back to 5.6 percent in 2021, the Commission forecast.
Spain’s deficit will just exceed 10 percent this year, up from 2.8 percent in 2019, and France will be close behind with a budget gap of 9.9 percent this year. The Commission expects it to fall to 4.0 percent next year.
Italy’s public debt will also record the biggest increase this year to 158.9 percent of GDP from 134.8 percent in 2019. It is seen falling to 153.6 percent in 2021, the Commission said.
Expectations for Europe’s economy have changed dramatically since February 13, when the Commission had predicted “a path of steady, moderate growth” of 1.2 percent this year and next.
At that time, uncertainty over US trade policy and a Brexit trade deal plus tensions in Latin America and the Middle East were the main threats.
The coronavirus outbreak in China was noted at the time as “a new downside risk” but the Commission’s assumption less than three months ago was “that the outbreak peaks in the first quarter, with relatively limited global spillovers.”
