Paolo Gentiloni, European Commissioner for the Economy, did not want to give false hope: “The Covid-19 pandemic has caused the worst economic contraction in the history of the EU.” And while the expected economic rebound in 2021 will indeed be on the agenda, “the European economy will not be able to return to its pre-pandemic level for another 2 years.”
The latest growth forecasts (and therefore recession) from the European Commission leave no room for doubt: the year 2020 will be very difficult, and the following years will not bring the expected and hoped-for relief. The economic crisis linked to the Covid-19 health crisis will take several years to disappear.
Brussels now expects a growth of 4.2% in the eurozone in 2021, compared to 6.1% in its previous report from July 2020.
The new estimates from Brussels do not take into account the latest health measures, including various re-lockdowns taken to curb the second wave. Therefore, the forecasts are uncertain, as the report points out. This might explain why the growth forecasts are slightly better.
While 2020 will experience a historic recession, the Commission now predicts a GDP drop of 7.8% in the eurozone, compared to 8.1% in its last estimates from July 2020. The European Union as a whole is doing slightly better: -7.4% in 2020.
Individually, Spain will be the most affected: a 12.4% GDP drop in 2020, ahead of Italy (9.9%) and France (-9.4%). It should be noted that the European Commission is more optimistic than Bercy, which expects an 11% recession for France in 2020, a forecast revised downward after the announcement of the general re-lockdown of the population.
These forecasts are marked by the uncertainty of the second wave, its economic and health impact, and the measures that will be necessary to curb it. The recession could therefore be much more severe, with Covid-19 only being controllable once a vaccine becomes available.
