EU cuts economic forecasts for the region, now projecting a 8.3% slump this year

EU cuts economic forecasts for the region, now projecting a 8.3% slump this year
  • Clock-gray 14:48
  • calendar-gray 07 July 2020

The European Commission has slashed its 2020 and 2021 economic expectations as the coronavirus pandemic keeps taking a toll on the 27 economies, APA reports citing CNBC.

The Brussels-based institution expects the 27-member region to contract by 8.3% this year, followed by a rebound of 5.8% in 2021. In May, the Commission estimated a 7.4% contraction for total GDP across the region this year, with a rebound of 6.1% in 2021.

“The economic impact of the lockdown is more severe than we initially expected. We continue to navigate in stormy waters and face many risks, including another major wave of infections,” Valdis Dombrovskis, vice-president of the European Commission, said in a statement Tuesday.

The outlook has worsened over the last two months irrespective of the steps that most European countries have taken to reopen their economies.

In recent days, concerns have also emerged about regional outbreaks. The Spanish authorities have re-imposed restrictions in the region of Galicia, and Portugal reinstated some measures in Lisbon after a growing number of infections.

The International Monetary Fund said in June that the euro area, the 19-member region that shares the euro, would contract by more than 10% in 2020. France, Italy and Spain could contract by about 12% this year, according to the IMF. 

To boost any economic recovery, the EU is working on an unprecedented fiscal stimulus plan. However, differences of opinion between the 27 heads of state mean a compromise is still to be found. They will be gathering in Brussels next week to discuss the proposed 750 billion euro rescue fund.

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