Friday 15 May 2020 10:49 am

Coronavirus sends Eurozone economy to worst quarter on record

The Eurozone economy shrank at the fastest pace on record in the first three months of the year, official figures have shown, as coronavirus brought normal life to a halt.

Euro area GDP plunged 3.8 per cent quarter on quarter in the first three months of the year, according to EU statistics body Eurostat. That is the worst performance since before the euro was created in the late 1990s.

Read more: German economy shrinks at fastest pace since financial crisis

The dire reading followed on from a weak final quarter of 2019, when the zone’s economy grew by just 0.1 per cent.

Analysts say second-quarter GDP figures will be far worse, however. The first quarter contained just a few weeks of coronavirus lockdown in March. But in April non-essential activities effectively ground to a halt for the whole month.

France’s economy was the hardest-hit in the first quarter, shrinking by 5.8 per cent. Italy – where a severe pandemic broke out early in March – saw its economy contract by 4.7 per cent.

Europe’s biggest economy Germany contracted by 2.2 per cent, figures showed today. 

The European Commission has predicted that the 19-member Eurozone economy will shrink by 7.7 per cent this year.

The official Eurozone GDP data comes as the area’s economies gradually reopen after lengthy lockdowns.

However, markets have been jittery this week over fears of a second wave of infections. Germany reported a rise in new cases as it reopened some shops and other businesses.

In the first quarter, employment fell by 0.2 per cent in the Eurozone, Eurostat said. That is the first decline since the Eurozone crisis in 2013.

Read more: When will the UK economy recover from coronavirus?

Jack Allen-Reynolds, senior Europe economist at Capital Economics, said: “The first-quarter GDP data confirm that virus containment measures have caused much bigger declines in activity in some euro-zone countries than in others.” For example, UK GDP dropped two per cent.

“Over the rest of the year, we think that there will be much greater variation in economic performance across the region than official forecasts suggest.”