Economic growth in the European Union (EU) has been steady over the past few years, both in terms of its pace and composition. Since 2013, the European economy has seen a relatively stable annual growth pattern, with private consumption serving as the primary driver.
The outbreak of COVID-19 is likely to impact the outlook going forward and growth in the region will depend on how the pandemic evolves. If it is largely contained by the second half of the year and measures to stop the spread of the virus—including quarantines, travel restrictions, and international border closures—are lifted, economic activity could resume, supply chains could recover, and financial markets and commodity prices could stabilize.
However, if the virus spreads to most countries and efforts to contain the outbreak spill into the third quarter of 2020, financial market pressures continue, commodity prices remain weak, and domestic healthcare systems are strained, the growth impacts will be more severe.
Although the magnitudes are uncertain, the pandemic is likely to derail the near-term outlook by interrupting daily activity, putting further downward pressure on commodity prices, disrupting tightly linked global and regional supply chains, reducing travel and tourist arrivals, and decreasing demand for exports from economies in the region.
There are trade-offs between the health benefits of policies to slow down the spread of the disease and the economic costs of these actions. During these difficult times, it is important for policy makers to act decisively to save lives and invest in their public health systems; but also to minimize the economic cost by strengthening the safety net for the most vulnerable.
Last Updated: Apr 17, 2020