UK economy to shrink eight per cent this year amid coronavirus, says EU
The UK economy will shrink by 8.3 per cent this year as Europe is ravaged by coronavirus and the lockdown measures put in place to contain it, the European Commission has predicted.
Paolo Gentiloni, European commissioner for the economy, said: “Europe is experiencing an economic shock without precedent since the Great Depression.”
In the UK, the European Commission predicted that unemployment will average 6.7 per cent in 2020 compared to around four per cent before coronavirus. It added that government support policies are “preventing an even steeper increase”.
Unemployment is set to remain elevated, the Commission predicted, staying at six per cent in 2020.
Although UK GDP is predicted to rebound by six per cent in 2020, the Commission said the forecast was uncertain. This reflected high levels of uncertainty about Brexit negotiations and the UK’s future trading relationships.
The Commission added that while business investment will recover in 2021, Brexit uncertainty will continue to weigh on firms’ decisions.
The predictions came as part of an in-depth report into the effect of coronavirus on the EU’s economy.
The Eurozone is expected to contract by a record 7.7 percent in 2020, the Commission said. It will rebound with 6.3 per cent growth in 2021.
Meanwhile, the EU economy is predicted to shrink by 7.4 per cent in 2020 and grow by roughly 6.1 per cent the following year.
However, Valdis Dombrovskis, executive vice-president for the economy, said: “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.”
The impact on European economies is set to vary markedly. Poland is expected to be the least affected, although its GDP is still predicted to contract by 4.3 per cent.
Greece, which has struggled with high levels of debt and anemic growth for almost a decade, will be worst-hit according to the Commission, with GDP plunging 9.7 per cent.
Gentiloni said: “Such divergence poses a threat to the single market and the euro area – yet it can be mitigated through decisive, joint European action. We must rise to this challenge.”