Brussels, Jul 7 (efe-epa).- The European Commission downgraded its economic growth forecast on Tuesday saying GDP would drop 8.7 percent in the eurozone and 8.3 percent across the entire bloc in 2020 as a result of the pandemic.
The EC lowered its spring forecast and said the revision from 7.7 percent projected for the euro area and 7.4 percent for the EU as a whole was the result of a more gradual easing of lockdown restrictions than previously anticipated.
“The economic impact of the lockdown is more severe than we initially expected. We continue to navigate in stormy waters and face many risks, including another major wave of infections. If anything, this forecast is a powerful illustration of why we need a deal on our ambitious recovery package, NextGenerationEU, to help the economy,” Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said.
“Looking forward to this year and next, we can expect a rebound but we will need to be vigilant about the differing pace of the recovery. We need to continue protecting workers and companies and coordinate our policies closely at EU level to ensure we emerge stronger and united,” the Latvian politician added.
Experts expect growth in 2021 to be “slightly less robust” than previously predicted and GDP is expected to grow by 6.1 percent in the eurozone and 5.8 percent in the EU.
May projections were somewhat more buoyant with a 6.3 percent increase forecast for the euro area and 6.1 percent across the bloc.
The region’s economy was throttled by the impact of the pandemic in the first quarter of 2020 despite lockdowns being introduced in March.
The second quarter was defined by an economic paralysis as a result of strict restrictions to curb the spread of Covid-19 resulting in significant economic disruption and a larger than projected contraction.
EC officials did have some good news in Tuesday’s report though with early May and June data pointing to a slight rebound suggesting the worst may now be over.
During the second half of the year, experts are looking to moderate growth as economies slowly reopen and resume activities.
This recovery will not be homogenous and will display marked differences between member states, the EC said in its report.
Among the major economies of the eurozone, Italy will suffer the biggest drop in GDP this year with an 11.2 percent decline, followed by Spain (10.9 percent), France (10.6 percent), the Netherlands (6.8 percent) and Germany (6.3 percent).
During 2021, the highest GDP growth is expected to take place in France (7.6 percent), followed by Spain (7.1 percent), Italy (6.1 percent), Germany (5.3 percent) and the Netherlands (4.6 percent.
The EC said the outlook on inflation had not shifted much since Spring forecasts and is expected to hover at around 0.3 percent this year and 1.1 percent in 2021 in the eurozone, while in the EU it will stand at 0.6 percent in 2020 and 1.3 percent the following year.
“The risks to the forecast are exceptionally high and mainly to the downside,” the EC said in the report.
Officials warned that uncertainty continues to loom, with no concrete idea on the scale nor duration of the pandemic and whether new containment measures will be needed in future to tackle potential outbreaks.
Given the circumstances and gloomy short term outlook, Paolo Gentiloni, Commissioner for the Economy, urged member states to rally and get behind the bloc’s recovery plan to deal with the economic shock:
“The policy response across Europe has helped to cushion the blow for our citizens, yet this remains a story of increasing divergence, inequality and insecurity. This is why it is so important to reach a swift agreement on the recovery plan proposed by the Commission – to inject both new confidence and new financing into our economies at this critical time,” Gentiloni said.EFE-EPA