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6 May, 2020 12:03

EU economy set to contract 7.5% this year in worst economic shock since Great Depression

EU economy set to contract 7.5% this year in worst economic shock since Great Depression

The coronavirus pandemic will plunge most of Europe into its worst recession since the 1930s, according to a grim forecast released by the European Commission.

Brussels has had to abandon any hope of growth for both the EU and euro area in 2020, as the economies are set to contract by 7.5 and 7.75 percent respectively, according to this year’s Spring Economic Forecast released on Wednesday. The decline is set to be the worst ever for the eurozone. Compared to previous estimates, growth projections have been revised down by around nine percentage points.

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“Europe is experiencing an economic shock without precedent since the Great Depression,” said European Commissioner for the Economy Paolo Gentiloni.

While the EU expects that the deep recession will be followed by a growth of over six percent, the losses inflicted by the virus are unlikely to be offset till the end of 2021. The report signals that the recovery will be “uneven,” as lockdown measures to stop the spread of the Covid-19 will not be lifted simultaneously by all the members of the bloc.

“While the immediate fallout will be far more severe for the global economy than the financial crisis, the depth of the impact will depend on the evolution of the pandemic, our ability to safely restart economic activity and to rebound thereafter,” the EU’s Vice President for Economic Affairs Valdis Dombrovskis said in a statement.

The European Commission noted that the figures may change for the worse if the pandemic lasts longer, preventing the reopening of businesses and travel. The economic downturn may be “far larger” than assumed in the baseline scenario of the latest forecast.

Some members of the union, including economic heavyweights, have already made their own gloomy predictions on the aftermath of the coronavirus outbreak. EU’s biggest economy, Germany, said it could record the worst economic dive in the post war-era, as its gross domestic product (GDP) may decline over six percent. France expects almost the same downturn as Germany, while Spain expects its economy to contract by 9.2 percent this year.

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