The European Commission predicts unprecedented economic shock

The spring economic forecast of the European Commission (EC) published on Wednesday, promises in 2020, “a recession of historic dimensions”.

Еврокомиссия прогнозирует беспрецедентный экономический шок

It is reported by Interfax-Ukraine.

“Europe is experiencing unprecedented since the great depression of the economic shock. The scale of the recession and the volume recovery will be uneven, since they depend on the speed at which can be lifted isolation measures, from the value of such services as tourism in each (national) economy, and financial resources of each country”, — said the member of Commission on Economics, Paolo Gentiloni.

In his opinion, “such differences are a threat to the single market and the Euro zone, but a joint and decisive action at the European level can allow it to soften”.

“We need to rise to this challenge,” said the Commissioner.

Providing an analysis of the EC at a press conference on Wednesday in Brussels, he named six key conclusions from the spring forecast for 2020.

First, according to him, “now it is clear that the EU has entered into the deepest economic downturn in its history”.

It is expected that the EU economy as a whole will shrink by a record 7.4% this year and 7.7% in the Euro area. The EC member said that this is more than in 2009, when a decline of about 4.5%.

“In 2021, we expect the rebound to 6.1% in the EU and 6.3% in the Euro area. This is not enough to fully offset losses this year,” said Gentiloni.

Second, he continued, and the recession and the recovery will be uneven. Aggregate numbers for the EU and the Euro area hides considerable differences between countries.

Thirdly, inflation will also be much weaker. “It is expected that this year consumer prices will fall significantly, reflecting the sharp weakening of demand and a sharp drop in oil prices”, — explained the Commissioner.

Fourth, unemployment will rise, although the policy measures will seek to limit its growth.

“The impact of the pandemic will be felt in the labor market that will put an end to the ten-year period of the improvements”, said Gentiloni.

Fifth, a strong and necessary political measures “will lead to an increase in government deficit and public debt in 2020”. States ‘ response to the pandemic in the form of fiscal measures aimed at limiting social and economic damage will inevitably lead to a marked deterioration in public finances this year in all member States, concluded in the European Commission.

Sixthly, Gentiloni pointed out the risks for the nearest economic prospects due to the fact that economic activity in the EU plummeted by about a third. Such a shock has led to a number of shocks of demand, supply, industrial production, investment, trade and capital flows.

“However, once the pandemic is under control and containment measures can be gradually weakened, the European economy should begin to recover in the second half of this year”, — said the member of the European Commission.

However, given the severity of the economic impact this year, the EU economy, according to the forecast, should not completely compensate for these losses at the end of 2021. The volume of production at the end of next year will be about 3% lower than predicted in last autumn forecast of the EC.

Answering the question why the European Commission chose the three developed scenarios of development of economy are the most optimistic, Gentiloni said he would call his base.

One of the two more negative scenarios is based on the fact that followed by a second wave of infection, EU member States will return to isolation and the other on the fact that in the autumn or winter will be a repeat of the epidemic that will once again require very strict measures.

“Our base scenario is based on the hypothesis that, starting in may, we will begin the gradual exit from isolation, taking into account local peculiarities. (…) You know, the world of science is not clear how the situation will develop, so we base our forecast on the most likely evolution of the pandemic, that is, its gradual disappearance,” explained a member of the EC in the economy.