EU predicts 'deeper recession'

Bloc leaders call for quick decisions on activating rescue package next week

The European Union painted a gloomier picture on Tuesday for its economic growth in the coming two years, putting pressure on EU leaders meeting next week in their bid to reach an agreement on an ambitious recovery plan.

The 19-member eurozone will contract by 8.7 percent in 2020 and grow by 6.1 percent in 2021, while the 27-member EU economy is forecast to shrink by 8.3 percent this year and expand by 5.8 percent next year, according to the Summer 2020 Economic Forecast.

The spring forecast in early May projected the euro area economy to contract only 7.7 percent and EU economy to shrink 7.4 percent. Its forecast for 2021 growth was also a bit more rosy.

The European Commission forecast is still better than the one released by the International Monetary Fund two weeks ago. It forecast a 10.2 percent contraction this year for the euro area.

"The economic impact of the lockdown is more severe than we initially expected. We continue to navigate in stormy waters and face many risks, including another major wave of infections," said Valdis Dombrovskis, the European Commission executive vice-president.

Italy, Spain and France, the three largest EU economies after Germany, will experience the worst economic recession among euro area members, according to the latest forecast. Italy's economy will contract by 11.2 percent this year while Spanish economy will contract by 10.9 percent. France will be the third worst performer with its economy to decline 10.6 percent. That contrasts with the spring forecast of a contraction of 9.5 percent for Italy, 9.4 percent for Spain and 8.2 percent for France.

Comparatively, economic contractions for Germany, the Netherlands and Poland are forecast to be milder.