Like other industries across the globe, European Union (EU) industries were not exempt from the dark side of the COVID 19 pandemic.
With subsequent pandemic waves and widespread hospitalizations, a report released by the European Parliament shows that the EU GDP suffered a mighty fall in 2020. In the second wave, the EU registered much higher death-per-million-people rates than most other countries. However, after the first half of 2020 had passed, the economy suffered a rebound as countries began lifting the containment measures, hoping to boost their economies.
The Effect of the Pandemic
The Dark Side
According to the European parliament report, the real EU GDP should reach pre-crisis levels by mid-2022. By 2021, the GDP growth stood at about 3.6% to 4.2% and was projected to be slow for the subsequent two years. While the EU was working hard at getting better figures, it lagged behind other regions, including China and the United States. To start with, the region had been hard hit by the pandemic. Moreover, the pre-crisis economy was still relatively low. To top it all off, the unemployment rates had gone up in 2020, hitting a high of 8.7% in the euro area. While the stats were not as bad as the 2008 financial crisis, they still called for immediate action.
The Growth Aspect
While many industries suffered during the pandemic, e.g., in the tourism sector, some performed exceptionally well. Examples include the digital sector and the health industry. Most businesses had no option but to go digital to keep up with the lack of human interaction and tech companies reaped from this. Moreover, towards the beginning of 2021, the automobile and textile industries were also recovering quite well despite their poor performance in 2021.
EU’s Response to The COVID 19 Pandemic
The Recovery Fund
By the end of April 2020, the EU leaders were already talking about establishing a recovery fund to stabilize the economy. The total recovery package amounted to ?2,364.3 billion. The goal was to increase member state capacities to deal with new and existing variants while protecting the livelihoods of their citizens. Of this amount, a good ?540 billion went into protecting employees, businesses, and member states.
Revised Banking Regulations
Even with the recovery fund, the EU also changed the capital requirements regulations, enabling credit institutions to offer more economic support. Part of the discussed changes included reducing the capital held for non-performing loans, altering the leverage ratio, and introducing capital relief measures.
Individual Member State Directives
Member states also offered discretionary support (subsidies, employment support, etc.), guaranteed debt support, tax and social contribution deferments, and equity injection support. An average of ?3.5 trillion went to supporting such measures within the first half of 2020. To some level, these and the EU’s efforts were undirected and, therefore, took on a one-size-fits-all approach.
Will the EU Economy Recover?
Current projections have the EU volume output at its pre-crisis level by the end of 2021, with a GDP growth rate of 4.8% in 2021 and 4.5% in 2022. Consumer prices are also expected to go up, thanks to raw material shortages and capacity constraints. Moreover, the inflation rate is projected at 2.2% in 2021 and 1.6% in 2022, raising hope that the economy could suffer a boost.
Uncertainty, however, still ranks high, with most people unsure of when the next shoe will drop. Relying on risk management and sustainability companies like Lewben.com can enable businesses to remain on top of things as far as recovery and future growth go.
The EU will have to embrace more directed efforts on the policy side of things, channeling funds to specific needs rather than taking on an ad hoc approach. Even so, it has done a great job in supporting its member states, which points to a better GDP in time.
