Finland will be the slowest EU economy to recover from Covid-19 crisis

Finland and Sweden will be the member states of the European Union (EU) experiencing a slower recovery from the economic crisis caused by the coronavirus pandemic.

The effects of the Covid-19 on the European Union's economy will be even more devastating than initially thought, according to the latest forecast from the European Commission.

In the 19 euro area countries, gross domestic product (GDP) should contract by 8.7% on average this year, according to the calculations of EU economic experts, significantly deeper than the 7.7% decline predicted in May.

For the whole 27-country EU, a downturn of 8.3% is expected in 2020.

Finland's forecast

The forecast shows that the Finnish economy will contract 6.3% in 2020 - in line with last spring's forecast - but worsens the outlook for 2021. If GDP growth of 3.7% was forecast before for next year, now that forecast has been reduced to 2.8%, the lowest value in the entire European Union.

The second country with the slowest recovery would be Sweden, whose GDP this year will fall by 5.3% and in 2021 will only increase it by 3.1%, according to the Commission's calculations. The average GDP growth rate forecast in 2021 for the euro area is 6.1% and 5.8% for the EU-27.

The values ​​for the two Nordic countries are also far from the figures of the major EU economies. Italy, France, Spain and to a lesser extent Germany will experience severe declines this year, but all will grow at greater rates in 2021.

Click on the table to enlarge.

Table: GDP change forecast, by member state. Source: European Commission.

Uncertainty

"The summer forecast shows, first of all, that the road to recovery is still paved with uncertainty," EU Economy Commissioner Paolo Gentiloni said as he presented the sobering figures in Brussels on Tuesday.

Moreover, the recovery from the slump will be "slightly less robust" than modelled in the last forecast from early May, according to a statement from the commission.

Despite a number of policies taken at the EU and national level, the bloc is only expected to return to growth in 2021.

The eurozone can anticipate a return to GDP growth at 6.1% next year, while the whole EU should see a rebound of 5.8%.

The forecast updates the grim picture of the bloc's economic health following months of Covid-19 containment measures that saw shops, restaurants and hotels shuttered. Many of these measures have been gradually lifted in EU countries.

According to the EU's executive arm, "early data for May and June suggest that the worst may have passed."

Second wave

However, the forecast is predicated on the assumption there is no major second wave of coronavirus infection and is therefore surrounded by "great uncertainty," Gentiloni stressed.

The 27 EU leaders are currently trying to strike a deal on a huge multibillion-euro stimulus package to mitigate the worst effects of the recession. So far, nothing concrete has been agreed.

Gentiloni urged EU leaders on Tuesday to reach a swift agreement on the plan. They are to meet in Brussels for a summit focused on the package next week.

The measures taken so far on the EU and national level have helped "cushion the blow" for citizens, but the state of the bloc's economy is still "a story of increasing divergence, inequality and insecurity," Gentiloni said in a statement.

France, Italy and Spain are set for sharper downturns, the senior EU official said at the press conference, whereas Germany, the Netherlands and Poland can expect milder contractions.