Earlier this week, the European Union (EU) released its estimates regarding its economic forecasts. The European Central Bank (ECB) is expected to maintain its rates.
For the first time since the announcement of European countries lifting their lockdown measures, the European Union has forecasted a 7.4% contraction. The recent prediction may bring the worst economic shock since the Great Depression in the 1930s.
The European Commission also highlighted Italy as one of the hardest-hit nations by the coronavirus pandemic, contracting 9.5% this year.
They also added that a “deep recession” may be in the works for Italy as it continues to push down its economy. Italian public debt is set to strike 158.9% of GDP this year and its public deficit is set to rise to 11.1%
European Union still working on a stimulus package
The European Commission, the executive arm of the EU, was assigned last month to develop a financial solution that will help countries around the region.
Market participants want to know how much the European Union will provide in additional coronavirus stimulus, however, European Commission President Ursula von der Leyen told CNBC last week that they are still working on the details of the coronavirus stimulus package.
Looking at the GDP of the European Union — a gathering of 27 countries — it has contracted by a record of 3.5% in the first quarter of the year, and the region is facing an unprecedented economic crisis on the back of the ongoing pandemic.
In their meeting last April, the 27 heads of state of the European Union tried to develop a “Recovery Fund” in order to support governments with limited financial capabilities through either loans or grants.
Austria is ready to support the recovery of the region’s economies through loans as they were also against the idea of “Eurobonds,” according to Austrian Chancellor Sebastian Kurz.
On the other hand, other nations drowning in debt such as Italy are pushing for grants so that their finances take a lesser hit.
The slow pace taken by the European Union might further put its economy at risk in the long run. The U.K. is currently finding a way to jumpstart its economy amid the COVID-19 pandemic after recent reports came in this week that they have surpassed Italy in terms of death tolls.
ECB, other analysts assess economic pain points
The Bank of England (BoE) is expected to leave rates unchanged while analysts wait for its next monetary policy scheduled for June.
The central bank has cut rates twice this year and announced £200 billion [AU$384.32 billion] of new quantitative easing, bringing its bond-buying program to a total of £645 billion since the start of the pandemic.
Analysts also expect the Monetary Policy Committee (MPC) to hold the pressure off with its stimulus program.
If the European Union does not act swiftly in this coronavirus pandemic, chances are more grim predictions lie ahead from its analysts.