Europe Headed for Double-Dip Recession Following Further Covid-19 Restrictions

Following what were potential signs of a recovery, Europe’s economy contracted again in the final quarter of 2020, as numerous governments reimposed Covid-19 restrictions to contain new strains of the virus.

According to Eurostat data published on Tuesday, GDP contracted by 0.7% in the 19 eurozone countries, while the EU’s GDP levels declined by 0.5% in the final three months of the year. The previous quarter registered economic growth of 12.4%, when European nations began to reopen their economies prior to the pandemic taking a turn for the worse once again.

The statistics also show that for the entire year, the pandemic caused a 6.8% economic contraction for the euro area, and a 6.4% decline for the entire 27-nation bloc. Despite the GDP decline being less serious than originally anticipated, it still suggests that Europe’s economy is teetering on the edge of a double-dip recession.

In the first half of the year, Europe underwent two consecutive quarters of GDP declines, which were followed by a rebound between July and September. What Eurostat referred to as the “sharpest increase” on record turned out to be limited according to the latest data. As a result, the region may be moving towards an even steeper economic drop in the first quarter of 2021, and thus plunge into yet another recession.

“In the first quarter of 2021, the decline is likely to be somewhat steeper. However, there will not be a slump like the one in the first half of 2020,” suggests Commerzbank economist Christoph Weil, later cited by Reuters. Nonetheless, despite the grim 2021 predictions, both the EU and the euro area are projected to finish off this year with a 4% GDP increase.

Information for this briefing was found via Eurostat and Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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