European future: updated forecasts of the European Commission and investment in digital technologies
9 July 2020
The updated economic forecast of the European Commission took into account the slow pace of lifting restrictions and published updated data. At the same time, the EU has invested in the development of digital technologies that can help to quickly restore production operations.The EU economy is expected to face a deep recession this year due to the coronavirus pandemic, despite a rapid and comprehensive policy response at both the EU and national levels. Since the lifting of restrictive measures is taking place at a more gradual pace than initially anticipated, the impact of the pandemic on economic activity in 2020 will be more significant.
The European Commission's updated economic forecast for summer 2020 notes that the Euro zone economy will shrink by 8.7% in 2020 and grow by 6.1% in 2021. Growth in 2021 will also be somewhat less stable than predicted in the spring. It is expected that the fastest pace of economic recovery will pick up in the second half of 2020.
The overall inflation forecast has changed little since the spring publication, but there have been some changes in pricing. Although the cost of oil and food has increased more than expected, this will be offset by lower VAT and other taxes in EU member States. Inflation in the Eurozone, as measured by the harmonised consumer price index (HICP), is currently forecast at 0.3% in 2020 and 1.1% in 2021.
Expectations regarding the extent and duration of the pandemic, as well as possible future measures to contain it, remain unknown. There is a significant risk that the labor market may suffer in the longer term, and that liquidity difficulties may result in solvency problems for many companies.
There is also a risk that financial markets will remain unstable and that member States will not be able to coordinate their national policy actions sufficiently. Failure to secure an agreement on the future trade relationship between the UK and the EU could also lead to a slowdown in economic indicators. More broadly, protectionist policies and excessive abandonment of global production chains can also negatively affect trade and the global economy.
In addition, recently the European investment Bank (EIB) and NavVis GmbH, the world leader in the digital technology market, announced the signing of a contract providing for financing in the amount of 20 million euros. After a large-scale transition to digital platforms during the pandemic, NavVis has experienced unprecedented growth and demand for its solutions and intends to continue investing in expanding operations to meet the need of countries and individuals for technological innovation. The EU Bank's loan is secured by a guarantee from the European Fund for strategic investment (EFSI).
European Commissioner Paolo Gentiloni noted that the EU's cooperation with the company and the financial assistance allocated to it will expand the boundaries of digital interaction between corporations in various countries of the region in order to resume their activities as effectively as possible and restore their pre-crisis level of productivity.
For its part, the company promised to use the allocated funds to increase its technological presence in the global market and support countries in managing their digital transformation. The investment will help accelerate the introduction of digital platforms to enterprises and support this area in the industry.