European Economy More Severe Than Expected: "Economic Shock Larger, Recovery Slower"

European Commission Lowers Growth Forecast for This Year from -7.4% to -8.3%
Next Year's Economic Growth Rate Also Revised Down from 6.1% to 5.8%

[Asia Economy Reporter Naju-seok] The European Union Commission (EC) has further downgraded its economic growth forecast for this year due to the impact of the novel coronavirus infection (COVID-19). It also lowered the recovery outlook for next year, analyzing that the economic damage caused by COVID-19 exceeds initial expectations.

[Image source=AP Yonhap News]

On the 7th, the EC forecasted that the European Union (EU) Gross Domestic Product (GDP) will contract by -8.4% this year. This is a 0.9 percentage point downward revision from the -7.4% forecast released in May this year.

Next year, the economy is expected to return to growth, but the recovery is anticipated to be weak. The EU GDP is projected to grow by 5.8% next year, down 0.3 percentage points from the previous growth forecast of 6.1%.

The EC cited the slow pace of easing lockdowns implemented by governments to curb the spread of COVID-19 as the reason for the sluggish recovery. Although European countries such as Germany lifted lockdown measures introduced to contain COVID-19, limited reimposition of restrictions has occurred due to confirmed resurgence of infections.

The EC pointed out the possibility of further downward revisions to the economic growth forecast. The EC stated, "The risks to the economic growth forecast are extremely high," adding, "The risks are mainly tilted to the downside." It further noted, "The scale and duration of the COVID-19 pandemic, as well as the need for additional lockdown measures, remain unknown variables."

[Image source=AP Yonhap News]

Among EU member states, Italy is predicted to experience the worst economic situation this year. Italy's GDP is forecasted to contract by -11.2% this year. Spain is expected to shrink by -10.9%, Croatia by -10.8%, and France by -10.6%. Germany, the largest economy in the EU, is also projected to contract by -6.3% this year.