Euro Zone : a fall in GDP worse than expected for the year 2020 - The Point

The economic forecasts for the euro area darken it a little. According to data published by the european Commission, Tuesday, July 7, the situation is of more c

Euro Zone : a fall in GDP worse than expected for the year 2020 - The Point

The economic forecasts for the euro area darken it a little. According to data published by the european Commission, Tuesday, July 7, the situation is of more concern than what was advanced up to now. Thus, the gross domestic product (GDP) of the euro area should, in reality, a drop of 8.7 % on the year 2020, before seeing a marked improvement in 2021, with an increase of 6.1 %. Forecasts which are more pessimistic than those outlined at the beginning of the month of may last.

" The economic impact of the confinement is more severe than we had originally planned. We continue to sail in troubled waters and are facing many risks, including a new major wave of infections, " the Covid-19, - has explained the vice-president of the european Commission, Valdis Dombrovskis, was quoted in a press release. Brussels had anticipated in the beginning of may, a fall in GDP of 7.7% in 2020, and then a recovery (+ 7.4 %) in 2021. "These forecasts show the effects of economic consequences of this pandemic," said the european commissioner for the Economy, Paolo Gentiloni.

France especially hard hit, with Italy and Spain

the Three countries, Italy, Spain and France, are particularly affected by this recession, with a GDP decline of more than 10 % in 2020. Italy would thus its GDP plummet by 11.2% in 2020, before rebounding in 2021 (+ 6.1 per cent). The Spanish GDP would fall by 10.9% in 2020, and then would straighten + 7.1 % the following year. As for the French GDP, it could decline by 10.6 % this year, then back to 7.6 % next year.

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Germany is also, conversely, part of the country, with Luxembourg, Malta and Finland, which should best limit breaks, with a GDP decline of 6.3 % this year and a recovery to 5.3% in 2021. "In the second quarter of 2020, economic output is expected to be much more contracted than in the first quarter ", underlines the european executive in its press release. "However, the early data for may and June suggest that the worst may be past. The recovery is expected to accelerate over the second half, even if it remains incomplete and uneven from one member State to the other, " he adds.

The unknowns that persist

Brussels, however, stressed that the "risks" weighing on growth remain " unusually high ". "The magnitude and duration of the pandemic, as well as the containment measures that may be necessary in the future, remain largely unknown," according to the Commission, which, for the moment, the principle that there will be no second wave of infections.

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other risks that are judged to be " significant ", weighing also on the labour market, the solvency of companies and the stability of financial markets would have an impact on growth. On the other hand, "the rapid availability of a vaccine against the coronavirus" and an agreement of member States on the recovery plan of the economy proposed by the Commission would have positive consequences.

Updated Date: 07 July 2020, 06:33

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