The economic consequences of the corona epidemic in Europe are now reflected in the hard data, exceeding even the worst fears. In the first quarter of 2020, economic output in the euro zone fell by 3.8 percent compared with the previous quarter. There has never been such a sharp decline in the history of the euro area.
The figures from the countries that have also already presented an initial calculation for the losses in the first quarter are also sobering. Economic output has fallen in all countries, and more than significantly so. The declines from the financial crisis of 2008/2009 were easily undercut. In France, gross domestic product fell by 5.8 percent, in Spain by 5.2 percent, in Italy by 4.7 percent, in Belgium by 3.5 percent and in Austria by 2.5 percent.
Based on the data now available on EMU and the major countries, it can also be assumed that the German economy – provided there are no significant revisions – experienced a sharp decline in GDP of around 3 percent in the first quarter. The Federal Statistical Office will publish the first figures on 15th May.
Detailed information from the countries shows that almost all components of demand were down. Investments fell the most, followed by private consumer spending. Exports and imports fell to a similar extent. One exception was government consumption, which increased slightly in almost all countries, thus at least slowing down the decline in GDP somewhat.
Since the statistical data had to be collected under the difficult conditions of the initial restrictions, even the results now reported are subject to a high degree of uncertainty. An even deeper decline cannot be ruled out due to revisions in later reports.
For the second quarter, an even sharper decline in gross domestic product is to be expected for the euro zone. In most countries the lockdown was only implemented from mid-March onwards and accordingly „only“ stalled the economy for „about“ half a month. In the second quarter, however, the whole of April is affected by the initial and production restrictions. In some cases, the restrictions will not be eased until mid-May. As a result, the losses will be all the greater. And since a complete lifting of the lockdown is not to be expected due to the high risk of infection, the catch-up effect in the rest of the second quarter is likely to be only very subdued. We must therefore be prepared for further horror reports on economic growth in the second quarter.