https://ec.europa.eu/info/business-economy-euro/economic-performance-and-forecasts/economic-forecasts/spring-2020-economic-forecast-deep-and-uneven-recession-uncertain-recovery European Economy Institutional Papers are important reports analysing the economic situation and economic developments prepared by the European Commission's Directorate-General for Economic and Financial Affairs, which serve to underpin economic policy-making by the European Commission, the Council of the European Union and the European Parliament. Views expressed in unofficial documents do not necessarily represent the views of the European Commission.

1. 6 MAY 2020

2. 1. The deepest recession since the Great Depression with an uneven impact
2. An incomplete and uneven recovery
3. Inflation will be significantly weaker
4. Unemployment is set to increase, though policy measures should limit its rise
5. Necessary policy measures will cause public deficits and debt to rise in 2020
6. Risks to the outlook are exceptionally large and to the downside
Key messages from the Spring 2020
European Economic Forecast

3. A deep recession followed by a partial recovery
GDP in 2021 to remain far below the level expected in the Winter Forecast
-7.4%
6.1%
2.1%
1.5%
1.4%
1.4%
90
92
94
96
98
100
102
104
106
2018 2019 2020 2021
GDP Spring forecast, EU GDP Winter forecast, EU
index, 2018=100

4. Global economy also set to contract
Global growth and global imports (excl. EU)
3.9 3.7
3.0
-3
5
6.0
4.1
0.1
-10
7
-12
-9
-6
-3
0
3
6
9
12
-6
-4
-2
0
2
4
6
17 18 19 20 21 17 18 19 20 21
GDP growth (excl. EU) (lhs) World imports (excl. EU) (rhs)
y-o-y % y-o-y %

5. Real-time indicators reveal a broad-based shock
Electricity consumption during the lockdown period
compared to the same period of 2019
Air traffic
compared to the same period of 2019
0
20
40
60
80
100
120
Mar 1 Mar 14 Mar 27 Apr 9 Apr 22
Total network DE FR IT ES
Source: Eurocontrol (total flights,Instrumental Flight Rules)
% of flights on the same day in 2019
78
95
84
87
50
55
60
65
70
75
80
85
90
95
100
IT DE FR ES
lockdown period (% of the same period in 2019)
Source: Entso-e
The period under consideration varies across countries

6. Survey data point to a sharp decline in activity
Manufacturing, Services, and Construction PMIs, euro area and Member States
10
20
30
40
50
60
10
20
30
40
50
60
Nov
19
Jan
20
Mar
20
Nov
19
Jan
20
Mar
20
Oct
19
Dec
19
Feb
20
.
Manufacturing Services Construction
DE FR ES IT EA
Source: IHS Markit (Flash PMIs for April 2020) Data available up to the cut-off date of the spring forecast

7. Financial market resilience has been tested
Stock exchange indices
60
70
80
90
100
110
120
130
140
janv-18
févr-18
mars-18
avr-18
mai-18
juin-18
juil-18
août-18
sept-18
oct-18
nov-18
déc-18
janv-19
févr-19
mars-19
avr-19
mai-19
juin-19
juil-19
août-19
sept-19
oct-19
nov-19
déc-19
janv-20
févr-20
mars-20
avr-20
mai-20
Euro STOXX 600 US S&P 500
Index, Jan 2018=100
Source: Macrobond

8. Labour markets hit but policy measures cushion the blow
Employment and unemployment rate, EU
1.6 1.4
1.0
-4
3
8.1
7.2
6.7
9
8
6
7
8
9
10
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
17 18 19 20 21 17 18 19 20 21
Employment (lhs) Unemployment rate (rhs)
y-o-y % %

9. Sizeable fiscal policy support
Discretionary fiscal policy and liquidity measures, in % of EU GDP
0.4
3.2
4.4
22.1
0
5
10
15
20
25
EU initiatives Member States, EU
budgetary measures liquidity support
% GDP

10. Lower inflation reflects oil price and demand drop
Inflation breakdown, euro area
-1.5
-0.5
0.5
1.5
2.5
3.5
-1.5
-0.5
0.5
1.5
2.5
3.5
12 13 14 15 16 17 18 19 20 21
Energy and unprocessed food (pps.) Core inflation (pps.) HICP, all items
%
forecast
%

11. Asymmetric recovery: GDP
Real GDP level in 2021-Q4 compared to 2019-Q4
-3
-2
-1
0
1
2
IT ES NL EE LT HU BG FR DK FI IE BE RO CZ PT EA EU LV SI SE PL SK HR AT DE
%

12. Asymmetric recovery: Investment
Real Investment level in 2021-Q4 compared to 2019-Q4
-15
-12
-9
-6
-3
0
3
6
9
12
BG HU ES CZ SK NL SE EU EA PL AT FR HR DK LV BE IT DE FI SI PT LT EE
%

13. European growth maps 2020-2021
GDP change 2020 GDP change 2021

14. Budgetary outlook 2020

15. (-) A longer-lasting or more severe pandemic than assumed
(-) Fragmentation of the single market and entrenched structural divergences
(-) Financial instability globally and in the EU
(-) A rise in protectionism
(+) Impact of a well-coordinated and financed European recovery plan
(+) A faster than expected availability of a vaccine or treatment drug
Risks to the outlook are large and tilted to the downside

16. European growth maps 2020-2021
GDP change 2020 GDP change 2021