Europe has gone through a series of misfortunes over the course of the year 2020. While Brexit was underway for a stretch of 4 years, the pandemic was a challenge both unprecedented and unplanned for. With UK departing, along with its financial nucleus that served EU for decades, Europe sinks into economic peril that continues to cinch tight as the first month of the new year comes to a disappointing closure. However, with lockdowns imposing problems as the Covid variants surge throughout the region followed by a rather expected slump in the working sector, Europe’s economy is damaged beyond optimism of a speedy recovery. Now as the region suffers from a fatal blow of the pandemic and the health systems verge on a historical collapse, a recession is a harsh possibility lacing Europe.
The continent casts a gloomy shade of economic turmoil that partly stems from the strict policies in practice to control the infections beyond the already abysmal state. Eurozone suffered a drastic contraction to its GDP in the last quarter of 2020; the national income dipping down approximately 0.7% in the months of October to December. This was a sharp turnaround from the earlier recovery in the economy; a celebrated expansion of the Eurozone GDP by 12.4% in the preceding quarter. The rationale behind the steep recovery from the havoc wrecked by Covid being the resumption of economic activity after a prolonged lockdown. The expansion of the manufacturing sector followed by a flourish in the services sector shaped the growth. However, the slump bidding adieu to the yesteryear stems from the measures adopted by respective governments following the second wave of the Coronavirus. With strict adherence to lockdowns, sprawling nationwide in UK, the positive uptick in the economy tumbled down as ensue of a debilitated services sector caused by fretting tourism and social activities.
While the economic contraction was not as steep as the earlier forecasts of the expert economists; courtesy of the manufacturing sector continuing pace and rolling output even amidst lockdown, the European economy perished by a cumulative 6.8% in 2020. The UK, despite of its much-anticipated liberation from the European Union, faces much of the same issues but exponentiated by the idiosyncrasies posed by the Brexit Trade Deal. As trade disruptions are setting in with just one month going in the negotiated agreement, UK faces a crisis not only with wide Eurozone but within its own territory in the form of Northern Ireland. While the region continues to exist within the borders and jurisdiction of the Great Britain, the cross-border trade and restrictions post-Brexit pose a serious dilemma. With the new variants of the virus rampaging across UK, Lockdowns being extended and vaccination delays raking more problems, UK’s economy projects a gloomier picture following its bleak contraction of 10% last year as posted by the International Monetary Fund (IMF).
Not even halfway through the first quarter of 2021, and the optimistic figures earlier are playing a downturn on the prediction of the European economy. Although the economists worldwide have posited their opinion of a decline ‘Not like the one in the first quarter of 2020’, venerated institution’s like JP Morgan have adopted a pessimistic prediction of a 1% contraction in the first quarter of 2021; a polar stance to their earlier forecast of a 2% growth in the months of January to March. The predictions, however, were schemed before the lockdowns were re-imposed and ultimately skewed in the positive direction. Now with Europe’s biggest economy, Germany, posing a possibility of extending the lockdowns till late March and a full economic recovery ‘not on cards till 2023’, all eyes are on the European Central Bank as it convenes to decide on the monetary policy next week. Yet, with Nationalisation of vaccines giving birth to a new fiasco and doubts brimming in the post-Brexit Europe, a recession is the least of the concerns.