Second Covid-19 wave disrupts EU economic recovery
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Economic rebound was interrupted as the second wave of the Covid-19 pandemic hit Europe, the European Commission found.
Economic activity in Europe suffered a severe shock in the first half of the year and rebounded strongly in the third quarter as containment measures were gradually lifted. However, the resurgence of the pandemic in recent weeks is resulting in disruptions as national authorities introduce new public health measures to limit its spread.
A detailed economic forecast was published by the European Commission. The forecast was prepared in a context of severe uncertainty, with Member States announcing major new public health measures in the second half of October 2020 to limit the spread of the virus.
The increase in government deficits is expected to be very significant across the EU this year as social spending rises and tax revenues fall, both as a result of the exceptional policy actions designed to support the economy and the effect of automatic stabilisers.
However, the European Commission noted that epidemiological situation means that growth projections over the forecast horizon are subject to an extremely high degree of uncertainty and risks.
The Autumn 2020 Economic Forecast projects that the euro area economy will contract by 7.8% in 2020 before growing 4.2% in 2021 and 3% in 2022. The forecast projects that the EU economy will contract by 7.4% in 2020 before recovering with growth of 4.1% in 2021 and 3% in 2022. Compared to the Summer 2020 Economic Forecast, growth projections for both the euro area and the EU are slightly higher for 2020 and lower for 2021. Output in both the euro area and the EU is not expected to recover its pre-pandemic level in 2022.
The economic impact of the pandemic has differed widely across the EU and the same is true of recovery prospects. This reflects the spread of the virus, the stringency of public health measures taken to contain it, the sectoral composition of national economies and the strength of national policy responses.
The European Commission forecast that Malta’s economy will be impacted by Brexit. It also predicted that there will be modest growth in 2021.
