Standard economic growth measures ignore the economic precarity that the majority of American live in.
The European Union has predicted “a recession of historic proportions” due to the impact of the coronavirus with a drop in output of more than 7 percent, as it released its first official forecast of the damage the pandemic is inflicting on the bloc’s economy.
The 27-nation EU economy is expected to contract by 7.5 percent this year, before growing by about 6 percent in 2021.
“Europe is experiencing an economic shock without precedent since the Great Depression,” EU Economy Commissioner Paolo Gentiloni said in a statement.
“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.”
More than 1.1 million people have contracted the virus across Europe, and more than 137,000 have died, according to the European Centre for Disease Prevention and Control.
Unclear outbreak data, low testing rates and the strain on healthcare systems mean the true scale of the pandemic is likely to be much greater.
With the spread slowing in most European countries, people are cautiously venturing out of confinement and gradually returning to work. However, strict health measures remain in place amid concerns about a second wave of outbreaks and any return to something like normal life is at least months away.
The pandemic has hurt consumer spending, industrial output, investment, trade, capital flows and supply chains.
It has also hit jobs. The unemployment rate across the EU is forecast to rise from 6.7 percent in 2019 to 9 percent in 2020 but then fall to approximately 8 percent in 2021, the Commission said.
While the virus hit every member country, the extent of the damage it ultimately inflicts will depend on the evolution of the disease in each of them, the resilience of their economies and what policies they put in place to respond.
Italy, Greece, Spain and Portugal will be among the hardest-hit by the economic effects of the pandemic, while Luxembourg, Malta and Austria are to weather the shock better.
Greek GDP is to contract the most, by 9.7 percent, with Italy recording the second-deepest recession of 9.5 percent and Spain 9.4 percent.
Italy, the EU country hardest hit by the coronavirus, will see its budget deficit surge the most, to 11.1 percent of GDP this year from 1.6 percent last year, but it will fall back to 5.6 percent in 2021, the Commission forecast.
Spain’s deficit will just exceed 10 percent this year, up from 2.8 percent in 2019, and France will be close behind with a budget gap of 9.9 percent this year. The Commission expects it to fall to 4.0 percent next year.
Italy’s public debt will also record the biggest increase this year to 158.9 percent of GDP from 134.8 percent in 2019. It is seen falling to 153.6 percent in 2021, the Commission said.
Expectations for Europe’s economy have changed dramatically since February 13, when the Commission had predicted “a path of steady, moderate growth” of 1.2 percent this year and next.
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.”