The Croatian Economy is Among the Most Affected in the European Union

The coronavirus pandemic has severely impacted the economies of all EU member states, but unevenly, and those that rely more heavily on tourism will suffer the most, according to the temporary summer economic forecasts published by the Commission on Tuesday.

Croatia is among the three hardest-hit countries. The largest GDP decline is predicted in Italy, at 11.2 percent, Spain at 10.9, and Croatia at 10.8 percent. This is followed by France with a 10.6 percent decline and Greece with 9 percent. The smallest decline is expected in Poland (4.6 percent), Denmark (5.2 percent), Sweden (5.3 percent), and Romania and Malta at 6 percent each. In the largest economy, Germany, a decline of 6.3 percent is expected.

– The impact on the EU economy is symmetrical as the pandemic has affected all member states. However, significant asymmetry in the economic decline in 2020 and the strength of recovery in 2021 is expected. According to current forecasts, the differences in the extent of the pandemic’s consequences and the strength of recovery among member states will be even more pronounced than anticipated in the spring forecast, the Commission states.

On average, the euro area economy will shrink by 8.7 percent in 2020, and grow by 6.1 percent in 2021. Regarding the entire EU area, a decline of 8.3 percent is predicted in 2020 and a growth of about 5.8 percent in 2021. According to current forecasts, the decline in 2020 will be significantly greater than the 7.7 percent predicted for the euro area and the 7.4 percent predicted for the EU as a whole in the spring forecast from May 6.

Growth in 2021 is also expected to be somewhat weaker than previously anticipated in the spring.

– This forecast shows the devastating economic effects of the pandemic. Thanks to the policy measures taken across Europe, the blow to our citizens has been somewhat mitigated, but inequalities, disparities, and insecurity are increasing. Therefore, it is crucial that we quickly reach an agreement on the recovery plan proposed by the Commission. This will allow us to restore confidence in our economies and ensure the inflow of new funds at this critical moment, said Economic Commissioner Paolo Gentiloni.

The Executive Vice-President of the Commission responsible for the economy Valdis Dombrovskis also warns of the danger of a second wave of the pandemic.

– The economic consequences of movement restrictions are more severe than we initially expected. The situation remains difficult, and we are exposed to numerous risks, such as a possible new major wave of infections. This forecast clearly shows why it is essential for the recovery of the economy to reach an agreement on our ambitious recovery package, Next Generation EU. We can expect that this year and next will bring recovery, but we need to closely monitor the differences in its pace. We must continue to protect our workers and businesses and carefully coordinate policies at the EU level to emerge from the crisis stronger and united, says Dombrovskis.

The Commission states that the impact of the pandemic on economic activity was significantly felt already in the first quarter of 2020, although most member states began to introduce movement restrictions only in mid-March. Given the much longer period of disruption and movement restrictions in the second quarter of 2020, it is expected that economies will shrink significantly more than in the first quarter.

On the other hand, early data for May and June suggest that the most challenging period may have passed. Recovery is expected to gain momentum in the second half of the year, although it will still be incomplete and uneven among member states, the Commission adds. Regarding inflation, it is currently predicted that it will be 0.3 percent in the euro area, measured by the harmonized consumer price index, in 2020 and 1.1 percent in 2021. Inflation in the EU27 is expected to be 0.6 percent in 2020 and 1.3 percent in 2021.

{embed_digitalno_izdanje}{/embed_digitalno_izdanje}