The coronavirus pandemic has pushed the euro zone economy to into a contraction by 3.8 per cent in the first quarter compared to the first quarter of last year. The pandemic has seeverly impacted business activity in the region.
The European statistics office said that the preliminary numbers that were reported officially on Thursday were the lowest since records had been started to be kept in 1995. Analysts had expected a contraction of 3.5 per cent.
Covid-19, the disease caused by the novel coronavirus, has bit the 19-member euro area, which shares the single currency, very hard. Among the top six countries globally that have the highest number of infections include Germany, France, Spain and Italy, which are the four largest economies of the euro zone. All non-essential services have been closed down for several weeks because of the strict lockdown measures that have been imposed in most of the euro zone countries to prevent the spread of the pandemic.
A nationwide lockdown, starting March 10, was first initiated by Italy in terms of European countries. Economists expect that economic data for the second quarter could be much worse because only a few countries in the zone have just started to ease some of the strictest lockdown measures, thereby opening up economies to a small extent.
According to the statistics office of France, there was a 5.8 per cent contraction year on year in the economic growth of the country in the first quarter. This was the steepest drop for the country in a quarter since it had started to keep records for the same back in 1949. In the final quarter of 2019, there was a contraction of 0.1 per cent in the second-largest economy of the region. Technically, France is now in recession because of two consecutive quarters of contraction in economic growth.
Starting May 11, some of the lockdown measures are slated to be lifted in the country. However economists argued that the economic challenges that are to be faced by France will be much bigger than those for neighboring Germany.
“Besides the harsher lockdown, a bigger services sector and a smaller fiscal response will contribute to France weathering the Covid-19 pandemic worse than Germany,” Florian Hense, economist at Berenberg said in a note Thursday.
On the other hand, the drop in retail sale in Germany in March was the fastest since January of 2007 according to new data. There was a 5.6 per cent drop in monthly retail sales during the month, said the German statistics office on Thursday.
In late April some retail businesses were reopened in Germany. However the German government said on Wednesday that the country will be facing its worst recession since the Second World War. The country has cut down its GDP forecast for 2020 to -6.3 per cent from a January estimate of 1.1 per cent.
(Adapted from XinhuaNet.com & CNBC.com)