Eurozone economy suffers its worst drop on record as it shrinks by 3.8% in the first quarter amid coronavirus shutdown as experts warn of worse to come in next three months
- GDP in 19-member eurozone suffered worst slump since records began in 1995
- Economists expect worse to come because lockdowns are still only weeks old
- The EU as a whole suffered a 3.5 per cent drop, also the largest on record
- Here’s how to help people impacted by Covid-19
GDP in the 19-member eurozone fell by 3.8 per cent in the first three months of this year, even though lockdowns only began in March.
The plunge is the worst since records began in 1995 – worse than during the financial crisis of 2008-09.
The drop compares to a 4.8 per cent contraction in the US during the first quarter as the shock from the outbreak hits economies around the world.
This chart from Eurostat shows that the quarterly drop in eurozone GDP (the red bar on the far right) and the EU (the blue bar) is even worse than during the 2008-09 financial crash. The lines show a different set of figures which compares the year-on-year change
The EU as a whole suffered a 3.5 per cent drop, which is also the largest on record, according to the bloc’s statistical office Eurostat.
The new coronavirus was mostly unheard of at the start of the January-March quarter (Q1), and was only declared a pandemic on March 11.
Italy was the earliest eurozone country to declare a national lockdown on March 9, with others including Germany and France following later in March.
‘This points to an much bigger fall in activity in Q2, when the full lockdowns will be in effect for almost half the time and will then be only partially lifted,’ said Andrew Kenningham of Capital Economics.
The slumps were especially large in France (5.8 per cent) and Spain (5.2 per cent) where the lockdown has been particularly strict, economists say.
‘France and Spain have been among the most strict in terms of lockdowns and hence their economies have suffered more,’ said Bert Colijn, an economist at ING.
‘This would suggest that a country like Germany has experienced a smaller-than-average contraction,’ he said. Germany has not yet released its own figures.
The French slump was the worst since the country’s statistics agency began keeping the figures in 1949.
Some countries have begun to re-open shops (a customer is seen here shopping in Germany yesterday), but economists expect a worse economic slump in Q2
France’s drop was particularly pronounced in services that involve face to face interaction, such as hotels, restaurants and retail stores.
Some countries have begun to edge out of lockdown by opening some shops, but most people in Europe are still being urged not to leave home unless necessary.
The tourism and hospitality industry has also collapsed, with hotels and restaurants shut down to stop the spread of the disease.
Economists expect unemployment to rise in the coming months despite an EU scheme to help subsidise wages.
The EU’s economy and finance commissioner Paolo Gentiloni said the GDP data showed Europe was suffering an economic shock without precedent in modern times.
‘This is why we need a recovery plan that is sufficiently large, targeted at the hardest-hit economies and sectors, and deployable in the coming months,’ he said.
Consumer prices grew by 0.3 per cent from March to April, but that included a 9.6 per cent drop in energy prices.
US oil prices fell into negative territory earlier this month, meaning producers were paying customers to take unwanted petroleum off their hands.