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Gloomy economic outlook delivers one-two punch to coronavirus-ravaged Europe

Source: Xinhua| 2020-04-07 05:49:47|Editor: huaxia

BRUSSELS, April 6 (Xinhua) — A gloomy picture of European economies sliding into recession, forecast by industry associations and government officials alike on Monday, delivered a one-two punch to the coronavirus-ravaged continent.

Gross domestic product (GDP) in the eurozone and the European Union (EU) was likely to decline by 3 to 5 percent in 2020, while global GDP would fall by between 0.5 and 3 percent, the Federation of German Industries (BDI) said on Monday.

During the past 50 years, the last time that global economic output had fallen was in 2009 — down by 1.7 percent, according to the BDI.

In her first public appearance on Monday following her home quarantine, German Chancellor Angela Merkel warned that the EU is facing the “biggest test since its foundation.”

The pandemic has produced a “symmetrical shock” and all countries are “equally affected,” said Merkel.

The BDI foresaw that GDP in the U.S. would decline by 2 to 4 percent and in Japan, by 1 to 3 percent.

“A strong recession in the United States, Europe, and Japan is unavoidable this year,” said BDI Director General Joachim Lang.

In the EU, much would depend on “how quickly the tough health policy measures” in Italy, Spain, France, Germany, and many smaller economies would take effect, the BDI noted.

The industry association forecasted that Germany’s GDP would decline by 3 to 6 percent in 2020.

In France, Finance Minister Bruno Le Maire warned on Monday that the growth would likely record its worst post-war downturn.

“The worst growth figure that has been made by France since 1945 was in 2009 after the financial crisis of 2008: it was at -2.2 percent,” the minister said. “We will probably be at more than -2.2 percent this year.”

Smaller economies in Europe are also expected to feel the pinch.

Latvian central bank’s latest forecast suggests that the Baltic state’s GDP might shrink by 6.5 percent this year.

But its governor Martins Kazaks said on Monday that he didn’t rule out an even more severe contraction.

“Current data shows that each month reduces the economy by around two to three percentage points,” Kazaks said, stressing that the level of uncertainty is very high.

If the battle against the virus drags on, the Latvian economy might suffer even higher losses, he said.

In Denmark, the GDP would fall by 3.5 percent to 5.5 percent this year, according to a report released by the Danish Economic Council on Monday.

In the council’s most optimistic scenario, the Danish economy will return to normal levels relatively quickly after reopening after Easter, but GDP will fall by 3.5 percent.

However, in a pessimistic scenario, if another wave of contagion follows the Easter reopening of society, it would result in a second shutdown and a further new relief package that would contribute to a GDP decline of 5.5 percent.

“Both scenarios involve large government deficits and an increase in the public debt ratio,” said the report.

 

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