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Deep Recession Across Europe Predicted

The European Commission (EC) has revised its economic forecasts for the next year, now suggesting that the Eurozone recession will be more severe than they had originally thought. A separate study points out that unemployment numbers across the continent could also rise significantly in 2020.

What Have They Predicted?

The EC now believes that the Covid-19 pandemic and subsequent lockdown has caused greater damage to European economies then they originally thought that it would. As many countries struggle to get out of lockdown, the fear of localised lockdowns being imposed is growing. Spain is one of the nations where new outbreaks have forced this action.

The more gradual nature of the lifting of lockdown restrictions has caused the EC to revise their spring forecast on 2020’s economic activity. They had originally predicted a 7.7% decline, but this has now been changed to 8.7%.

As for 2021, they still expect to see output across the region increase substantially. However, their estimate has now been lowered from a 6.3% increase to a slightly more modest 6.1%. They have urged European countries to undertake a major stimulus programme to get their economies back on track.

The EC also mentioned the ‘exceptionally high’ downside risks to be taken into account. This comes from the fear the unemployment figures will spiral out of control if businesses go bust due to the on-going economic issues or if a second wave of infections appears later this year.

On the positive side, they believe that business investment will slowly begin to increase as the situation improves. They also pointed out that a coronavirus vaccine becoming available earlier than anticipated could greatly enhance the outlook.

A Look at Some Countries

The most badly hit country in Europe looks like being Italy, where an 11.2% contraction has now been predicted for 2020. Spain is facing a 10.9% drop in its GDP, while France has a 10.6% decline on the cards, according to this report.

Germany looks like being less affected than most countries, thanks to its smart handling of the crisis. The EC thinks that it will see just a 6.5% downturn in its GDP during 2020.

In the UK, the biggest fear right now is that unemployment numbers could reach levels that haven’t been seen in decades. The Organisation for Economic Cooperation and Development (OECD) suggested that unemployment could reach up to 15 % by the end of the year.

Analysts think that the number of people out of work could rise to 14.8% if a second wave of Covid-19 hits the country. If this is avoided, the figure should be around 11.7%. Either way, many businesses are expected to pay collection agency fees to recover funds during this crisis.

Spain is likely to be even worse hit, as the predicted jobless rate by the end of this year is 19.2%, rising to 20.1% in the case of a severe second wave of infections. In comparison, Germany’s unemployment rate is predicted to reach 5% or 5.6%, depending upon whether a second wave hits the country.