Output of the 19 countries in the eurozone slumped by a record 3.8% in the first three months of 2020 as the spread of the Covid-19 pandemic had a rapid and hefty impact on growth across Europe.
France and Italy, the second and third biggest economies in the monetary union area, fell into recession after the EU’s statistical agency eurostat reported an even bigger fall in gross domestic product (GDP) in the quarter ending in March than the financial markets had been expecting.
With countries only locking down their economies towards the end of the first quarter, analysts are braced for an even bigger slump in the April-June period.
Of the individual eurozone countries publishing data, France said that after a small decline of 0.1% in the final three months of 2019, its economy had contracted by 5.8% in the first quarter of 2020, the steepest decline since modern records began in the late 1940s.
Italy also had its second successive quarter of economic decline – contracting by 4.7% following a 0.3% decline in late 2019. The impact of Covid-19 on an already weak economy was enough to wipe out all the gains in GDP since the global financial crisis of 2008.
Spain, one of the countries most seriously affected by Covid-19 reported a quarterly drop of 5.2%, while Belgian and Austrian GDP fell by 3.9% and 2.5%, respectively.
Germany did not release its growth figures but the effects of the pandemic on the eurozone’s biggest economy were underlined by a 373,000 increase in unemployment and a jump to 10.1 million in the number of workers on reduced hours in April.
The eurozone was barely growing ahead of the Covid-19 shock, registering expansion of 0.1% in the final three months of 2019.
A recession is technically defined as two successive quarters of falling output, and analysts said it was now certain that the eurozone as a whole would suffer its biggest slump since its creation at the end of the 1990s.
The eurozone’s contraction in the first quarter was far more pronounced than that recorded by the US. On Wednesday, the US commerce department said the GDP of the world’s biggest economy had fallen by an annualised 4.8% between January and March, equivalent to a quarterly decline of just over 1%.
Andrew Kenningham, European economist at the consultancy Capital Economics, said the size of the hit to eurozone GDP should embolden the European Central Bank to step up its support for growth. “The blizzard of depressing economic data released on Thursday morning confirms that the eurozone economy was in freefall at the end of March, with GDP dropping by a record amount throughout the region.”
Bert Colijn, eurozone economist for ING bank, said: “France and Spain have been among the most strict in terms of lockdowns and hence their economies have suffered more. This would suggest that a country like Germany has experienced a smaller than average contraction.”