European Commission forecasts deeper recession for 2020
The economy in the European Union will plunge deeper into recession for 2020 and may recover only slightly in 2021 than previously thought, the European Commission predicted on Tuesday. The downbeat assessment of Europe’s economy comes as concerns piled over the U.S. recovery the surge of new coronavirus infections.
The EU executive said the 19-nation single currency area could contract by a record 8.7% this year before growing slighly by 6.1% in 2021. In early May, the Commission had forecast a 2020 downturn of 7.7% and a 2021 rebound of 6.3%.
The EU executive also significantly cut its earlier forecasts for France, Italy and Spain, which have been severely affected by the COVID-19 pandemic, and now expects now downturns in excess of 10% this year in each.
Economics Commissioner Paolo Gentiloni told a news conference that in order to reduce risks of a second recession, EU fiscal rules could remain frozen even after growth saw returns next year.
Gentiloni said that the rules may be reactivated only when the bloc’s output returns to levels closer to that of last year. However, no decision has been made and the matter remains controversial.
The Commission also said its inflation forecasts were little changed, at 0.3% this year and 1.1% in 2021.