EU Predicts Deeper Economic Hit 07/07 06:19
The European Union's executive arm forecasts that the bloc's economy will
contract more than previously expected because of the coronavirus pandemic.
BRUSSELS (AP) -- The European Union's executive arm forecasts that the
bloc's economy will contract more than previously expected because of the
coronavirus pandemic, which has caused lockdowns on business and public life
that are only slowly being eased.
The 27-nation EU economy will contract by 8.3% this year, before growing
5.8% in 2021, according to the latest predictions released Tuesday by the
"The road to recovery is still paved with uncertainty," EU Economy
Commissioner Paolo Gentiloni told reporters in Brussels. "This is mostly linked
to the epidemiological uncertainty."
In the previous forecasts released in May, when most of the continent was
still under lockdown, GDP was forecast to contract by about 7.5% this year and
to bounce back by 6% next year.
The European Commission said the impact on economic activity in 2020 will be
worse than expected because "the lifting of lockdown measures is proceeding at
a more gradual pace than assumed in our Spring forecast."
That was illustrated in separate data from Germany on Tuesday that showed
industrial production rebounded in May but was far from making up for the
collapse of the preceding months.
Gentiloni said that the EU's biggest challenge in the months to come will be
to find the right balance between the necessity to reopen EU economies and the
protection of citizens' health. More than 178,000 deaths related to COVID-19
have been recorded across the continent according to the latest numbers from
the European Centre for Disease Prevention and Control.
"We have to live with the danger of local outbreaks" that could lead to
plans to re-enter local lockdowns slowing down the economic recovery, Gentiloni
The group of 19 EU nations that use the euro as their currency will see a
record economic decline of 8.7% this year, and grow by 6.1% in 2021. In May it
had forecast a 7.8% decline this year, and growth of 6.3% in 2021.
Although the EU as a whole has been hard-hit by the downturn, Gentiloni said
the drop and the rebound will differ widely from one member country to another.
For instance, while Poland's economy is set to shrink by 4.6% this year,
France, Italy and Spain are expected to experience double-digit drops.
To ensure a quick bounce back, Gentiloni urged member states to adopt as
soon as possible a recovery fund aimed at pulling the EU out of the recession.
EU governments leaders and heads of state will meet next week in Brussels to
try to reach a compromise on the 750 billion-euro package proposed by the
Backed by Germany and France, the money in the fund would be incorporated in
the 2021-2027 EU budget. Two-thirds of the fund would take the form of grants
to be made available to EU countries, while the rest would be made up of
conditions-based loans for that governments can apply for.
Gentiloni said the expected effects of the recovery plan have not been taken
into account in the growth forecast, and that its quick implementation could
help brighten the outlook.
"It's important that an agreement is reached swiftly," he said. "To inject
new confidence and new financing into our economy in critical times."