Fully made up is not expected for this year's losses by the end of 2021. The corona pandemic pulls the EU economies in the worse ever recession. The Spring 2020 Economic Forecast, presented by the Commission on Wednesday, shows that the euro area economy will shrink by a record 7¾% in 2020 and grow by 6¼% in 2021.

The EU economy is forecast to contract by 7½% in 2020 and grow by around 6% in 2021. Growth projections for the EU and euro area have been revised down by around nine percentage points compared to the Autumn 2019 Economic Forecast.

The analysis indicates that the shock to the EU economy is symmetric in that the pandemic has hit all Member States. Nonetheless both the drop in output in 2020, from -4¼% in Poland to -9¾% in Greece, and the strength of the upswing in 2021 are set to differ significantly.

Economic recovery of each EU country will depend not only on the evolution of the pandemic there, but also on the structure of their economies and their capacity to respond with stabilising policies. The dynamics of the recovery in each Member State will also affect the strength of the pickup of other member countries, given the interdependence of EU economies.

At this stage, we can only tentatively map out the scale and gravity of the coronavirus shock to our economies, Valdis Dombrovskis, EC Executive Vice-President for an Economy that works for People, commented. He noted that while the immediate fallout will be far more severe for the global economy than the financial crisis, the depth of the impact will depend on the evolution of the pandemic, our ability to safely restart economic activity and to rebound thereafter.

This is a symmetric shock: all EU countries are affected and all are expected to have a recession this year, he outlined remarking that the EU and Member States have already agreed on extraordinary measures to mitigate the impact. “Our collective recovery will depend on continued strong and coordinated responses at EU and national level. We are stronger together.”

Paolo Gentiloni, EU Commissioner for the Economy, underscored that Europe is experiencing an economic shock without precedent since the Great Depression. He accented that both the depth of the recession and the strength of recovery will be uneven, conditioned by the speed at which lockdowns can be lifted, the importance of services like tourism in each economy and by each country's financial resources. Such divergence poses a threat to the single market and the euro area - yet it can be mitigated through decisive, joint European action. We must rise to this challenge, he stressed.

As the forecast manifests, the pandemic has severely affected consumer spending, industrial output, investment, trade, capital flows and supply chains. The expected progressive easing of containment measures should set the stage for a recovery. However, the EU economy is not expected to have fully made up for this year's losses by the end of 2021. Investment will remain subdued and the labour market will not have completely recovered.

The continued effectiveness of EU and national policy measures to respond to the crisis will be crucial to limit the economic damage and facilitate a swift, robust recovery to set the economies on the path of sustainable and inclusive growth.

While short-time work schemes, wage subsidies and support for businesses should help to limit job losses, the coronavirus pandemic will have a severe impact on the labour market.

The unemployment rate in the euro area is forecast to rise from 7.5% in 2019 to 9½% in 2020 before declining again to 8½% in 2021. In the EU, the unemployment rate is forecast to rise from 6.7% in 2019 to 9% in 2020 and then fall to around 8% in 2021.

Some Member States will see more significant increases in unemployment than others. Those with a high proportion of workers on short-term contracts and those where a large proportion of the workforce depend on tourism are particularly vulnerable. Young people entering the workforce at this time will also find it harder to secure their first job.

Consumer prices are expected to fall significantly this year due to the drop in demand and the steep fall in oil prices, which together should more than offset isolated price increases caused by pandemic-related supply disruptions.

Inflation in the euro area, as measured by the Harmonised Index of Consumer Prices (HICP), is now forecast at 0.2% in 2020 and 1.1% in 2021. For the EU, inflation is forecast at 0.6% in 2020 and 1.3% in 2021.

EU states have reacted decisively with fiscal measures to limit the economic damage caused by the pandemic. ‘Automatic stabilisers', such as social security benefit payments compounded by fiscal discretionary measures are set to cause spending to rise. As a result, the aggregate government deficit of the euro area and the EU is expected to surge from just 0.6% of GDP in 2019 to around 8½% in 2020, before falling back to around 3½% in 2021.

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