The European Union will contract 7.4% in 2020 as the coronavirus pandemic brings the worst economic shock since the Great Depression in the 1930s, the European Commission said Wednesday.
The executive arm of the EU has released its latest economic forecasts — the first estimates since European countries introduced lockdown measures to stop the spread of the virus. In February, the European Commission estimated a 1.4% rise in GDP for the EU this year.
"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," Valdis Dombrovskis, vice-president for economic affairs said in a statement.
European governments are working on plans to lift confinement measures after several weeks in lockdown. Italy, Portugal, Greece, Germany and Austria are just some of the countries which have started lifting some of their respective restrictions.
However, the reopening of economies is happening gradually, meaning that their overall business activity will be impacted for months to come.
"Europe is experiencing an economic shock without precedent since the Great Depression," Paolo Gentiloni, European Commissioner for the economy, said in a statement.
"Both the depth of the recession and the strength of recovery will be uneven … Such divergence poses a threat to the single market and the euro area," he said, calling on European governments to take decisive action.
The European Commission is currently working on further economic stimulus to the region. A proposal for a so-called Recovery Fund is expected in the coming days. Gentiloni has suggested the fund could reach 1.5 trillion euros ($1.62 trillion).
Italy's GDP to fall over 9% this year
Italy, which has been one of the hardest-hit nations worldwide by the pandemic, is seen contracting 9.5% this year.
That is the second-worst performance in the euro zone, after Greece, which is seen contracting by 9.7%.
"The COVID-19 pandemic and the related containment measures are set to push Italy's economy into a deep recession," the Commission said in its forecasts.
The Brussels-based institution believes that Italy's real output contracted by 18% in the first half of 2020, but it sees room for a rebound during the second half of the year.
According to the Commission, Italian public debt is set to reach 158.9% of GDP this year and its public deficit is set to soar to 11.1%
The pandemic is also expected to dent Europe's growth engine. Germany is seen contracting 6.5% in 2020.
Clarification: Thw story and headline have been updated with a more accurate measure of the GDP forecast given by the EU Commission.