The European Union (EU) on Thursday ditched hope of a quick turnaround for European economies, predicting that pre-pandemic levels will only be reached in 2023.
Announcing the new forecast, the European Commission's economy commissioner Paolo Gentiloni told journalists that the commission had predicted in its previous forecast in summer that a fast growth would take place in the latter half of this year, resulting in a milder growth for both the euro area and the EU in 2020 and a bigger growth for 2021, but the second wave of the outbreak forced the commission to revise its forecast.
Gentiloni explained that the pandemic caused the deepest recession in the EU history in the first half of 2020, followed by a strong rebound in the third quarter as containment measures were eased, but the resurgence of the pandemic and new restrictive measures have interrupted the rebound.
The growth is set to stall in the fourth quarter, and to pick up again in the first quarter of 2021, but it will take two years for the economy to regain its pre-pandemic level, he predicted.
The EU's gross domestic product (GDP) is forecast to contract by 7.4 percent this year, before growing 4.1 percent in 2021 and 3 percent in 2022. For the euro area, the GDP will decrease by 7.8 percent in 2020, grow by 4.2 percent in 2021 and 3 percent in 2022.
This forecast indicates that the EU's GDP will be just shy of its pre-pandemic level by the end of 2022, noted Gentiloni.
"We never counted on a 'V-shaped' recovery. Now we know for sure that we will not have one," he said.
Among the particularly hard-hit countries are Spain, which will see its GDP contract by 12.4 percent this year, Italy by 9.9 percent and France by 9.4 percent. Only Germany and Poland are forecast to reach or surpass their pre-pandemic GDP levels by the end of 2022.
Gentiloni explained that uncertainties and risks surround the economic forecast. There is also a risk that the scars left by the pandemic on the economy -- such as bankruptcies, long-term unemployment and supply disruptions -- could be deeper and farther reaching.
The ambitious policy measures in EU member states cushioned job losses during the first half of this year, but may lead to a delay in labor market improvements over the next two years. Unemployment will deteriorate when short-time work schemes are discontinued as well.
The commission expected the EU unemployment rate to increase from 6.7 percent in 2019 to 7.7 percent in 2020 and 8.6 percent in 2021. It is expected to decline in 2022 to 8 percent.
In its latest World Economic Outlook report, the International Monetary Fund projected the global economy to contract sharply by 4.4 percent this year. It predicted that all G20 members would experience negative growth with the exception of China, which would see its economy grow by 1.9 percent.