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The eurozone economy slowed at the fastest rate recorded in the first quarter of 2020, as measures to stem the coronavirus pandemic froze commercial and domestic activities, according to figures released Thursday.
According to Eurostat preliminary estimates, the eurozone’s gross domestic product fell 3.8 percent in the first quarter compared to the previous quarter. This is the biggest drop since the series began in 1995, and bigger than the worst in the financial crisis.
The contraction in the eurozone was worse than that experienced by the US. The US, where the economy contracted 4.8 percent at an annualized rate, according to data released Wednesday.
The gloomy economic news is likely to increase pressure on the European Central Bank to step up its measures to protect the eurozone economy from the full force of the pandemic when it announces its latest monetary policy decision on Thursday afternoon. ECB President Christine Lagarde warned EU leaders last week that the eurozone’s GDP could drop 15 percent this year.
France and Spain, two of the bloc’s largest economies, experienced sharp contractions in GDP in the first three months of 2020, figures separately released on Thursday showed.
France’s GDP fell 5.8 percent in the first quarter compared to the previous quarter, according to preliminary estimates by the country’s National Bureau of Statistics (Insee), the biggest decline since records began in 1949.
Meanwhile, Spain’s gross domestic production contracted 5.2 percent in the same period, according to preliminary estimates from its National Statistics Office (INE). This is the biggest drop since the series began in 1995.
Separate data from the German Federal Employment Agency showed that more than 10 million German workers have been registered to have a portion of their wages subsidized by the state while being left idle by their employers in response to the coronavirus crisis. Almost a quarter of all German workers have been sent home or part-time jobs during the pandemic.
Given that most European governments only started imposing a blockade on households and businesses in March, the region’s economy is expected to drop further in the second quarter. The pandemic is expected to trigger the worst recession in the global economy since the Great Depression of the 1930s.
Germany forecast this week that its economy would contract 6.3 percent year-round, before recovering next year. On Thursday, new data showed that German retail sales fell at the fastest pace in more than a decade despite strong growth in online and food shopping, while the number of airline passengers at German airports fell by 63 percent in March.
The economic contraction in the first quarter “will pale in comparison to the full collapse that will surely occur in the second quarter,” said Jessica Hinds, European economist at Capital Economics, as the restrictions were introduced mainly from mid-March.
Earlier this week, France’s Prime Minister Edouard Philippe announced plans to reopen parts of the economy starting May 11 to avoid the risk of economic “collapse”.
Meanwhile, in Italy, the number of job seekers fell 11% in March compared to the previous month. The proportion of people outside the Italian workforce increased to 35.7 percent in March from 34.9 percent in the previous month, and the proportion of people in employment decreased to 58.8 percent in March from a peak of 59.2 in June.
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Italy’s unemployment rate fell from 9.3 percent in February to 8.4 percent in March, as the number of unemployed fell from 267,000 to 2.13 million during the month.
The fall in the French economy was fueled by an “unprecedented” contraction of 6.1 percent in household consumption and an 11.8 percent drop in investment, Insee said. “The negative evolution of GDP in the first quarter of 2020 is mainly related to the closure of” non-essential “activities in the context of the implementation of the blockade since mid-March,” he added.
Florian Hense, an economist at Berenberg, said the first-quarter contraction in France’s economy had eliminated four years of growth, adding that “the country’s stricter government measures should better contain the Covid-19 pandemic, but they also affected plus economic activity. ” ”
France contracted 0.1% in the last quarter of 2019, which means that the French economy has entered a recession, defined as two consecutive quarters of negative growth.
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In Spain, the record economic contraction in the first quarter ends more than six years of uninterrupted growth, most of which was well above the pace of the eurozone average. The largest previous quarterly decline in the Spanish economy was in the financial crisis when it decreased by 2.6% in early 2009.
Spain has announced plans to start lifting its strong restrictions on society in May. But because a larger proportion of its economy depends on tourism, which has been severely affected, the country’s economy is believed to be more exposed to the Covid-19 pandemic.
