BRUSSELS – The European Union's executive arm forecasts that the bloc's economy will contract more than previously expected because of the coronavirus pandemic, which has caused lockdowns on business and public life that are only slowly being eased.
The 27-nation EU economy will contract by 8.3% this year, before growing 5.8% in 2021, according to the latest predictions released Tuesday by the European Commission.
“The road to recovery is still paved with uncertainty," EU Economy Commissioner Paolo Gentiloni told reporters in Brussels. “This is mostly linked to the epidemiological uncertainty."
In the previous forecasts released in May, when most of the continent was still under lockdown, GDP was forecast to contract by about 7.5% this year and to bounce back by 6% next year.
The European Commission said the impact on economic activity in 2020 will be worse than expected because “the lifting of lockdown measures is proceeding at a more gradual pace than assumed in our Spring forecast."
That was illustrated in separate data from Germany on Tuesday that showed industrial production rebounded in May but was far from making up for the collapse of the preceding months.
Gentiloni said that the EU's biggest challenge in the months to come will be to find the right balance between the necessity to reopen EU economies and the protection of citizens' health. More than 178,000 deaths related to COVID-19 have been recorded across the continent according to the latest numbers from the European Centre for Disease Prevention and Control.
“We have to live with the danger of local outbreaks" that could lead to plans to re-enter local lockdowns slowing down the economic recovery, Gentiloni said.