EU predicts ‘recession of historic proportions’ due to pandemic

BRUSSELS — The European Union predicts “a recession of historic proportions this year” due to the impact of the coronavirus with a drop in output of more than 7%, as it releases its first official forecast of the damage the pandemic is inflicting on the bloc’s economy.

The 27-nation EU economy is predicted to contract by 7.5% this year, before growing by about 6% in 2021. The group of 19 nations using the euro as their currency will see a record decline of 7.75% this year, and grow by 6.25% in 2021, the European Commission says in its Spring economic forecast.

More than 1.1 million people have contracted the virus across Europe and over 137,000 have died, according to the European Centre for Disease Prevention and Control. Unclear outbreak data, low testing rates and the strain on health care systems mean the true scale of the pandemic is much greater.

How quickly things can change. On February 13, the commission had predicted “a path of steady, moderate growth” this year and next of 1.2%. At that time, uncertainty over US trade policy and a Brexit trade deal plus tensions in Latin America and the Middle East were the main threats.

The coronavirus outbreak in China was noted at the time as “a new downside risk” but the commission’s assumption less than three months ago was “that the outbreak peaks in the first quarter, with relatively limited global spillovers.”

— AP