The EU’s Spring 2020 Economic Forecast projects that the EU economy will contract by over 7 per cent in 2020 and grow by 6 percent 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.

According to the report, each Member State’s economic recovery will depend not only on the evolution of the pandemic in that country, but also on the structure of their economies and their capacity to respond with stabilising policies. Given the interdependence of EU economies, the dynamics of the recovery in each Member State will also affect the strength of the recovery of other Member States. Additionally, noting the departure of the UK as an EU Member State, and given that the future relations between the EU and the UK are not yet clear, projections for 2021 are based on a purely technical assumption of status quo in terms of their trading relations.

The key messages were as follows:

1. There will be a large hit to growth followed by an incomplete recovery
2. Unemployment is set to increase, though policy measures should limit the rise
3. There will be a steep drop in inflation
4. Decisive policy measures will cause public deficits and debt to rise
5. The forecast is clouded by a higher than usual degree of uncertainty

The European Commission’s next economic forecast will be the Summer 2020 Interim Economic Forecast which is scheduled to be published in July 2020. This will cover only GDP growth and inflation. The next full forecast will be in November 2020.