Coordinated fiscal stimulus necessary to deliver full recovery by end 2021
Support business investment, consumer demand, maintain employment
Today, BusinessEurope published its Spring Economic Outlook 2020 in view of the economic crisis due to the COVID-19 pandemic.
BusinessEurope’s Director General Markus J. Beyrer said: “The EU, in common with the rest of the global economy, is clearly experiencing the deepest recession since the 1930’s, and we expect output to fall by around 8% this year. As we progressively reopen our economies, we will need to ensure we have a co-ordinated EU response in place to support consumer demand, business investment and maintain employment. Our present forecast is that the EU economy will not return to pre-crisis levels until the end of 2021. But our analysis shows that by ensuring the right policy mix, including a co-ordinated EU-wide fiscal stimulus, focussed particularly on growth-enhancing investment, we can help return output more quickly to pre-crisis levels, protect more jobs and reduce long-term damage to our business eco-system.”
In more detail, our forecast concludes:
- Our central forecast is for the EU economy to fall by 7.9% in 2020, and rebound with 5.8% growth in 2021.
- The depth of the recession and the strength of the ensuing recovery may also differ considerably between member states.
- Short-time working schemes have so far largely saved the EU the dramatic unemployment increases seen in the US. But without strong policy support for businesses and workers, unemployment levels could rise significantly above the 9% level the European Commission has forecasted for the EU in 2020.
EU stimulus through actual direct revenue and expenditure has been relatively small in relation to G7 economies like the US, Japan and Germany. We urgently need to deliver a co-ordinated EU fiscal stimulus matching the magnitude seen in other G7 economies.