Extraordinary and Plenipotentiary Diplomatist|June 2020
Businesses, schools, shopping centers, and restaurants have re-opened, and normal life seems to be getting back on track. However, even though this might seem like good news, the worst is far from over, since it is now time for Europe to bear the economic costs of the COVID-19 crisis. The pandemic and the subsequent lockdown that it necessitated has greatly disrupted not only the daily lives of people but also the economy, with global demand, labor supply, the prices of commodities, supply chains, trade, and capital flows having all been affected. It seems that Europe has entered a period of a recession of historical proportions; the worst that the EU has seen since its inception.
Recession knocking at the door
On May 6, the European Commission released its Spring 2020 Economic Forecast, which states that the European Union GDP is to contract by 7.5%. To put this into perspective, it was only in February that the Commission had forecasted a growth rate of 1.2% in the EU, and in comparison, the EU’s GDP during the 2009 financial crisis had contracted by 4.5%. In addition to this, unemployment in the EU is forecast to rise from 6.9% in 2019 to around 9% in 2020. If these estimates are worrying, then what’s even more concerning is that these estimates are based on the most favorable of outcomes, in which European countries will gradually lift their lockdowns and that the virus will not return. If setbacks and a resurgence of the virus occurs, then the commission has modeled two further scenarios, one in which output can fall as much as 15.5% in 2020 if lockdowns continue, and the other, where there is another 10% GDP decline if a second wave of the virus hits during the winter.
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