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The Organisation for Economic Co-operation and Development said the Eurozone economy could shrink between 5.6 percent and 15.1 percent by the end of the year. Its Economic Outlook report warned a second wave of the virus this autumn would pile on more misery to the 19-country single currency bloc. A “double-hit scenario” with new lockdowns and restrictive measures to halt the spread of the deadly disease would prolong the global recession, the OECD said.
On the euro area, the report added: “Lockdown measures to suppress the COVID-19 pandemic have led to a major recession.
“If a second pandemic wave takes place later this year, GDP is projected to contract sharply by 11.5 percent in 2020, and the unemployment rate will exceed 12 percent by end-2020, despite widespread use of short- time work schemes.”
Eurozone countries, including France, Italy and Spain, are amongst the worse hit of the world’s leading economies.
France, the EU’s second-largest economy, can expect to shrink between 11.4 and 14.1 percent.
Italy is forecast to slump between 11.3 and 14 percent and Spain could contract between 11.1 and 14.4 percent, according to the report.
The EU’s largest economy Germany can expect a decline in GDP of 6.6 percent.
But Britain’s economy is likely to to suffer the worst damage from the coronavirus crisis, according to the OECD.
The Paris-based think-tank has predicted an 11.5 percent slump that exceeds falls by France, Italy, Spain and Germany.
Laurence Boone, the OECD’s chief economist, however, played down the significance of the UK contracting by the biggest margin.
She said a precise calculation is difficult and the forecast showed the UK would experience similar contractions to Spain, France and Italy.
She said the world economy was “walking a tightrope” because of the threat of a second outbreak.
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Ms Boone said: “These scenarios are by no means exhaustive, but they help frame the field of possibilities and sharpen policies to walk such uncharted grounds. Both scenarios are sobering, as economic activity does not and cannot return to normal under these circumstances.
“By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments.”
The economist urged governments to work together to find a vaccine and provide support for the worst-affected industries.
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“Global cooperation to tackle the virus with a treatment and vaccine and a broader resumption of multilateral dialogue will be key for reducing doubt and unlock economic momentum,” she said.
“The international community should ensure that when a vaccine or treatment is available it can be distributed rapidly worldwide. Otherwise the threat will stay. Likewise, resuming a constructive dialogue on trade would lift business confidence and the appetite for investment.
“Governments must seize this opportunity to engineer a fairer and more sustainable economy, making competition and regulation smarter, modernising government taxes, spending, and social protection. Prosperity comes from dialogue and cooperation. This holds true at the national and global level.”
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