The European Union forecast dwindling annual economic growth from 2020 to 2022 for the bloc and its 27 member-states as a whole, and for the eurozone and its 19 member-states due to lingering economic damage from COVID-19.
Its "Autumn 2020 Economic Forecast" released Thursday by the EU Executive Commission projects the EU economy shrinking by 7.4% in 2020. It also sees the EU economy tumbling 4.1% in 2021 and 3% in 2022.
The economies in the eurozone are seen contracting by 7.8% in 2020; shrinking 4.2% in 2021 and by 3% in 2022. Economic growth in both the EU and the eurozone are not expected to recover to their pre-pandemic levels soon.
"Output in both the euro area and the EU is not expected to recover its pre-pandemic level in 2022," said the commission in its forecast report.
EU Commission vice president Valdis Dombrovskis said this forecast "comes as a second wave of the pandemic is unleashing yet more uncertainty and dashing our hopes for a quick rebound...but through this turbulence, we have shown resolve and solidarity."
To mitigate the already massive economic damage from the pandemic, the European Central Bank has unleashed 1.35 trillion euros ($1.58 trillion) into the EU economy through regular bond purchases.
This move intends to keep affordable credit flowing to businesses so they remain open and capable of maintaining their workforce.
The ECB is expected to ramp-up its monetary stimulus in light of the immense economic pain inflicted by the ongoing second wave of infections on the continent.
ECB President Christine Lagarde last week said there is "little doubt" a policy review at the Dec. 10 meeting will lead to more ECB action to support the EU economy.
Deficits and unemployment among EU member-states have risen in step with the continuing ravages wrought by the pandemic. The EU report reveals the increase in government deficits "is expected to be very significant across the EU this year as social spending rises and tax revenues fall." These twin outcomes are the result of the exceptional policy actions designed to support the economy and the effect of automatic stabilizers.
The EU forecasts the aggregate government deficit in the eurozone should increase to 8.8% of gross domestic product this year from 0.6% of gross domestic product in 2019, before falling to 6.4% in 2021 and 4.7% in 2022.
The forecast estimates the aggregate Euzone debt-to-gross domestic product ratio increasing from 85.9% of gross domestic product in 2019 to 101.7% in 2020; 102.3% in 2021 and 102.6% in 2022.
Massive job losses and unemployment within both the EU and the eurozone are being tackled by policy measures taken by member-states. The measures along with initiatives at EU level have helped cushion the impact of the pandemic on labor markets.
The report said the unprecedented measures taken to mitigate unemployment have muted the rise in the unemployment rate compared to the drop in economic activity. Unemployment, however, is set to continue rising in 2021 as member-states phase out emergency support measures and more people enter the labor force.
The forecast projects the unemployment rate in the EU rising from 6.7% in 2019 to 7.7% in 2020 and 8.6% in 2021. The rate is expected to drop to 8.0% in 2022. Unemployment in the eurozone might rise from 7.5% in 2019 to 8.3% in 2020 and 9.4% in 2021, and slow down to 8.9% in 2022.