PwC comments on the latest Eurozone GDP data

Barret Kupelian, senior economist at PwC, comments on today's Eurozone GDP data:

"Today’s estimate of the Eurozone GDP for the first quarter of the year was, as expected, a record breaker. The bloc contracted by 3.8% quarter on quarter—its sharpest rate of contraction in the 21st century and significantly worse than the 2.4% quarter on quarter contraction at the height of the global financial crisis in 2009."

"The partial national breakdown shows that the countries that were earliest and hardest hit from the virus—namely Italy and Spain—experienced the sharpest decline in economic activity for the first quarter of the year. These economies also happen to be the third and fourth largest economies of the Eurozone and thus mechanically drag down the headline GDP number. This partly sets the context on why the Eurozone GDP performance in the first quarter of the year is worse than other large advanced economies (see Chart 1)."

Chart 1: Quarterly growth rates across major economies

"All eyes are now on how society and the economy react to the careful and gradual opening of certain aspects of the activity in the various Eurozone economies. Some countries (see Chart 2) have taken measured steps already in this direction. Assuming no significant flare ups of the virus, more countries are expected to follow these cautious steps along with some help from the European Commission which, for example, has already put together an action plan for re-energising tourism across the continent."

Chart 2: Evolving government response to COVID-19

"As Chart 2 shows, the UK is still behind the gradual and cautious lifting of restrictions compared to some Eurozone countries, in part because of the epidemiological data. However, assuming the current policy of gradually lifting restrictions in economic activity in the Eurozone continues, there could be a silver lining for UK businesses which could see some modest increases in external demand."

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