EU predicts "deeper recession" in 2020 than expected
BRUSSELS, July 7 (Xinhua) -- The European economy will face a "deeper recession" than previously predicted due to the prolonged containment measures on the COVID-19 pandemic, the European Commission said in its "Summer 2020 Economic Forecast" on Tuesday.
The 19-member eurozone economy is projected to contract by about 8.7 percent in 2020 before recovering at an annual growth rate of 6.1 percent next year, said the Commission.
The 27-member European Union (EU) economy is forecast to contract by 8.3 percent in 2020 and grow by 5.8 percent in 2021, it said.
Compared with the spring forecast published in May, the summer one's projections on economic contraction in 2020 are somewhat dimmer and recovery in 2021 slower.
In its spring forecast, the European Commission projected that the eurozone economy would contract by 7.75 percent in 2020 and grow by 6.25 percent in 2021, and the EU economy was forecast to shrink by 7.5 percent in 2020 and grow by around six percent in 2021.
With a far longer period of disruption and lockdown taking place in the second quarter of 2020, economic output is expected to have contracted significantly more than in the first quarter, said the European Commission.
Early figures for May and June have suggested that "the worst may have passed," and recovery is expected to gain traction in the second half of the year, it added.
However, the hit to the economy was so strong that the partial rebound in the second half of the year will not be able to lift the annual growth rate significantly, said Paolo Gentiloni, EU commissioner for economy.
"The chart shows how far we will have to move away from the growth path that we had expected before the pandemic occurred," he told the press on Tuesday.
According to Gentiloni, a similar trend was observed in the world economy (excluding the EU). In the first quarter of 2020, the world economy outside the EU is estimated to have contracted by more than three percent quarter-on-quarter, partly because of the impact of the anti-virus measures in China in the first three months. In the second quarter, the world's output declined much deeper owing to the global COVID-19 pandemic.
"The still rising daily infections at global level do not bode well for the world economy," said the commissioner, who predicted a decline in the overall real global gross domestic product (GDP), excluding the EU, of around four percent in 2020 and a five-percent recovery in 2021.
"The economic forecasts for the summer show that the road to recovery is still paved with uncertainty," said Gentiloni, also a former Italian prime minister, in a statement released by the Commission, adding "This crisis is more serious than we expected."
While all the 27 EU member states expect to suffer an economic contraction in 2020 and a bounce back in 2021, divergences exist among countries in terms of both recession and rebound, said Gentiloni.
He attributed the unevenness to the different timing and stringency of containment measures, as well as different economic structures, namely exposure to tourism and services reliant on person-to-person contact.
More severe slowdowns in 2020 are projected for France, Italy and Spain, whereas Germany, the Netherlands and Poland are expected to be more resilient, according to the European Commission.
The Commission predicted a contraction of 11.2 percent in 2020 for the Italian economy, which meant Italy would suffer the most this year among the EU member states. It predicted Italy would rebound with 6.1-percent growth next year.
For France, the GDP is expected to fall by 10.6 percent in 2020, and set to expand by 7.6 percent in 2021. For Spain, growth in 2020 is forecast to contract by 10.9 percent and the outlook for 2021 remains at 7.1 percent.
In Germany, GDP in 2020 is projected to fall by 6.3 percent, and a 5.3-percent growth is expected in 2021. In the Netherlands, real GDP is forecast to decline by about 6.8 percent this year, before seeing a partial recovery of 4.6 percent in 2021. In Poland, real GDP is expected to plunge by 4.6 percent in 2020, and increase by 4.3 percent in 2021.
The frozen economy has resulted in a sharp decline in the number of hours worked but not in unemployment figures, thanks to the short time work schemes of the EU, noted Gentiloni.
"These mark a substantial difference from developments outside Europe, such as in the U.S. where layoffs have occurred immediately and in large numbers," he said.
Though the extended short-time work schemes have played an important role in keeping employees attached to their jobs, these schemes are not identical in all member states, which contribute to market differences, he added. Enditem