Europe Faces Historic Recession Due to COVID-19 Pandemic

The European Commission sharply revised its economic growth forecast for the EU and the euro area due to the significant disruption caused by the COVID-19 pandemic. The Commission’s Spring 2020 Economic Forecast projects GDP contractions of 7.7 and 7.4 percent for the euro area and the EU this year, respectively, down from previous estimates of positive 1.2 and 1.4 percent growth.

“Europe is experiencing an economic shock without precedent since the Great Depression,” said Paolo Gentiloni, European Commissioner for the Economy, while also emphasizing the need for a European response to the crisis: “Both the depth of the recession and the strength of recovery will be uneven, conditioned by the speed at which lockdowns can be lifted, the importance of services like tourism in each economy and by each country's financial resources. Such divergence poses a threat to the single market and the euro area - yet it can be mitigated through decisive, joint European action.”

Having affected consumer spending, industrial output, investment, trade and supply chains, the economic fallout of the measures deemed necessary to contain the coronavirus is expected to be massive, sparing only a select few industries. While the recession brought about by the pandemic will be extraordinarily deep and painful, the easing of lockdown measures that has already started in many countries fuels hopes of a swift recovery. The European Commission also expects the EU’s economy to rebound in 2021, however, it doesn’t expect this year’s losses to be fully recovered by the end of next year.