Let me begin by thanking DG ECFIN and my team for their efforts. It is not easy to have solid forecasts in such an uncertain situation. We have with five key messages emerging from the 200 page forecast: [ Ссылка ] #eudebates #Forecast #Summer #Economy #Statistics #Gentiloni #Outlook #GDP #Eurozone
First, the pandemic caused the deepest recession in EU history in the first half of 2020, surpassing that in the Great Financial Crisis. This contraction, which was uneven across Member States, was followed by a strong rebound in the third quarter – a very strong rebound – as containment measures were eased.
Second, in recent weeks we are facing the resurgence of the pandemic and new containment measures have been taken. The economic rebound has been interrupted. Growth is set to stall in the fourth quarter but to pick up again as of the first quarter of 2021.
Overall, EU GDP is forecast to contract by 7.4% this year, before growing 4.1% in 2021 and 3.0% in 2022. For the euro area: -7.8% in 2020, 4.2% in 2021, 3.0% in 2022.
This forecast implies that GDP for the EU as a whole will be just shy of its pre-pandemic level by end of 2022. But unfortunately this is not the case for all Member States.
Third, policy measures taken at national and EU level continue cushioning the impact of the COVID-19 crisis on both households and firms. Furthermore, a highly accommodative monetary policy has supported market funding as well as bank lending. To support confidence and the recovery, it is essential that monetary and fiscal policies continue to work hand-in-hand.
Fourth, given the current exceptional uncertainty, we have made two important “technical” assumptions:
First, we assume that some degree of containment measures will remain in force throughout the forecast horizon. This partially explains the slower path of recovery. However, after a significant tightening in the fourth quarter of 2020, the stringency of the measures is expected to gradually ease in 2021.
Second, and without prejudice to the outcome of ongoing negotiations on a future EU-UK partnership, we assume that the EU and the UK will trade on WTO Most Favoured Nation rules from 1 January 2021.
Fifth, downside risks are exceptionally large, but there are also upside risks to our forecast. I will run through these at the end of my presentation.
Starting with a look at the international situation, global GDP, excluding the EU, is expected to contract by about 3.8% in 2020, considerably more than during the Global Financial Crisis.
It is forecast to rebound by around 4.7% in 2021, and to moderate to 3.7% in 2022.
Coming back to the EU, monthly data confirm that the economy has been on the mend as of May.
Parts of industry, construction and retail trade rebounded vigorously over the summer, driven by strong pent-up demand.
By contrast, services relying on close person-to-person contacts have remained weaker as containment measures have remained in place and also consumer behaviour, affecting demand and supply for services involving such as travel, tourism, restaurants and entertainment.
The flash estimate from Eurostat published last Friday indicates that the third quarter rebound was even stronger than we expected. The rebound was driven by pent-up demand and decisive policy action both by Member States and the EU.
But as I've underlined, the resurgence of infections across Europe in recent weeks is causing renewed disruptions. This is expected to put the recovery on hold in the short term. It also leaves the outlook subject to extremely high uncertainty.
The gradual decline in the level of stringency over the course of 2021 should translate into consumption and investment gradually rebounding. GDP is forecast to continue growing in 2022, but at a somewhat more subdued pace.
In short, we never counted on a ‘V-shaped' recovery. Now we know for sure that we will not have one.
The pandemic is evolving by the day, making any forecast subject to high uncertainty.
We have therefore produced two alternative scenarios to complement our baseline forecast.
The downside scenario considers the negative impact on economic sentiment and firms' financing conditions of stricter and more protracted virus containment efforts. As you can see, this downside scenario projects significantly worse economic outcomes in the near term.
By contrast, the upside scenario assumes an earlier and stronger recovery in business and consumer confidence resulting from faster progress in the development of an effective treatment, or a better adaptation by households and firms to the new COVID-19 environment. The depth of the recession in 2020 and the speed of the recovery in 2021 and 2022 are expected to vary widely across Member States.
Nearly half of our Member States are not expected to recover their pre-pandemic level of GDP by the end of 2022.
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