By Simon Savsek, Joana Conde, Andrea Brasili, Matteo Ferrazzi, Aron Gereben, Laurent Maurin, Ricardo Santos and Patricia Wruuck
The EIB Economics Department is producing a fortnightly update on the economic impact of the COVID-19 pandemic in Europe and across the world. It also covers impacts on the financial system and the evolving economic policy response. Here we summarise the main messages.
The European economy is on its way towards a deep recession
GDP decreased by 3.5% in the EU (3.8% in the euro area) in 2020Q1 compared to the previous quarter (q-o-q). At the country level, France’s GDP dropped by 5.8% q-o-q, Spain by 5.2% and Italy by 4.7%, the largest quarterly falls since the series began.
Expectations for Q2 remain gloomy. This is confirmed by the EIB’s coincident indicator, the flash Purchasing Managers Index indicators and the European Commission’s Business and Consumer sentiment indicators in Europe, which all deteriorated in April, with a significant worsening of the expectation component for the next three months. More than 20 million European workers from Germany, France, Italy, Spain and the UK, about a fifth of all workers, are currently on temporary work-schemes. All in all, a U-shape recovery seems a rather likely outcome.