Spring 2020 Economic Forecast of the European Union
The COVID-19 pandemic represents a major shock for global and EU economies, with very severe socio-economic consequences. Despite the swift and comprehensive policy response at both EU and national levels, the EU economy will experience a recession of historic proportions this year. The Spring 2020 Economic Forecast of the European Union projects that the Euro area economy will contract by a record of 7.75% in 2020 and grow by 6.25% in 2021. The total EU economy is expected to contract by 7.5% in 2020 and grow by around 6% in 2021. The shock to the EU economy is symmetric in that the pandemic has hit all Member States, but both the drop in output in 2020 (from -4.25 % in Poland compared to -9.75 % in Greece) and the strength of the rebound in 2021 are set to differ markedly.
Each Member State's economic recovery will depend not only on the evolution of the pandemic in each country but also on the structure of their economies and their capacity to respond with stabilising policies. Given the interdependence of EU economies, the dynamics of the recovery in each Member State will also affect the strength of the recovery of other Member States. Short-time work schemes, wage subsidies, and support for businesses will help limit job losses. However, the COVID-19 pandemic will have a severe impact on the labour market. The unemployment rate in the euro area is foreseen to rise from 7.5% in 2019 to 9.5% in 2020 before declining again to 8.5% in 2021. In the EU, the unemployment rate is anticipated to rise from 6.7% in 2019 to 9% in 2020 and then fall to around 8% in 2021.
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