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BRUSSELS, Nov. 5 – The European Union (EU) on Thursday abandoned hope for rapid change for European economies, predicting that pre-pandemic levels will only be reached in 2023.
In announcing the new forecast, European Commission economics commissioner Paolo Gentiloni told reporters that the commission had predicted in its previous summer forecast that rapid growth would occur in the second half of this year, resulting in on softer growth for both the euro zone and the EU in 2020 and higher growth for 2021, but the second wave of the outbreak forced the commission to revise its forecast.
Gentiloni explained that the pandemic caused the deepest recession in EU history in the first half of 2020, followed by a strong rebound in the third quarter when containment measures were eased, but the resurgence of the pandemic and new measures restrictive measures have interrupted the rally.
Growth is expected to halt in the fourth quarter and pick up again in the first quarter of 2021, but it will take two years for the economy to regain its pre-pandemic level, he predicted.
The EU’s gross domestic product (GDP) is forecast to contract by 7.4 percent this year, before growing by 4.1 percent in 2021 and 3 percent in 2022. For the euro area, the GDP will decline 7.8 percent in 2020, grow 4.2 percent in 2021 and 3 percent in 2022.
This forecast indicates that the EU’s GDP will be slightly below its pre-pandemic level by the end of 2022, Gentiloni noted.
“We never have a ‘V-shaped’ recovery. Now we know for sure that we won’t have one,” he said.
Among the countries particularly affected are Spain, which will see its GDP shrink by 12.4 percent this year, Italy by 9.9 percent and France by 9.4 percent. Only Germany and Poland are projected to reach or exceed their pre-pandemic GDP levels by the end of 2022.
Gentiloni explained that uncertainties and risks surround the economic forecast. There is also the risk that the scars left by the pandemic on the economy, such as bankruptcies, long-term unemployment and supply disruptions, will be deeper and more far-reaching.
Ambitious policy measures in EU member states cushioned job losses during the first half of this year, but may delay labor market improvements for the next two years. Unemployment will deteriorate when short-term work plans are also suspended.
The commission expected the EU unemployment rate to rise from 6.7 percent in 2019 to 7.7 percent in 2020 and 8.6 percent in 2021. It is expected to decline in 2022 to 8 percent.
In its latest World Economic Outlook report, the International Monetary Fund projected that the world economy will contract sharply by 4.4 percent this year. He predicted that all G20 members would experience negative growth with the exception of China, which would see its economy grow by 1.9 percent.
