OECD ECONOMIC OUTLOOK JUNE 2020

Austria: GDP is projected to contract by 6.2% in 2020 if there are no further virus outbreaks, and by over 7% if there is a renewed outbreak later this year . Economic activity will pick up as confinement measures ease, but the economic recovery will nevertheless take time, with output still below its pre-crisis level by the end of 2021.

Belgium: The contraction of GDP in 2020 is set to reach 9% if there is no further outbreak. In case of a second pandemic wave later this year , the contraction of GDP is set to reach about 11%. In both cases, GDP is projected to remain well below the pre-crisis level in end-2021.

Bulgaria: The economy faces the largest contraction since the late 1990s. If the virus outbreak subsides by the summer , a more rapid recovery in private consumption and investment would lead to a lower output contraction of 7.1% in 2020. A second COVID-19 wave in 2020 would lead to an economic contraction of about 8% and of 0.3% in 2021. Unemployment would in this event almost double after employment had reached historical highs in 2019.

Czech Republic: The lockdown and disrupted supply chains have had a deep adverse economic impact. If the virus outbreak subsides in the coming months, GDP may fall by 9.6%. If a further virus outbreak returns before the end of the year, GDP is projected to decrease by 13.2% in 2020. The economy is projected to recover only partially by end-2021.

Denmark: Containment measures to curb the pandemic and associated uncertainty will cause a sharp contraction in economic activity, by almost 6% if further shutdown measures are avoided and by more than 7% in 2020 if there is another virus outbreak later in the year. A second outbreak would result in significant scars from prolonged unemployment and many bankrupt businesses, delaying the recovery. In the single-hit scenario, the brief and more limited shutdown than in other OECD countries combined with sizeable government support will limit economic and well-being costs. In both scenarios, favourable export specialisation partly weathers the initial trade disruptions, but eventually external demand will largely determine the recovery path.

Estonia: The COVID-19 outbreak is having a sharp impact on the economy. If the virus outbreak subsides by the summer, there would be a quicker recovery in consumer and business confidence and the fall in output would be lower, at 8.4% in 2020. A second virus outbreak would delay the return of consumption and investment, which, together with the impact of virus confinement measures, could reduce real GDP by 10% in 2020.  

Finland: The COVID-19 pandemic has pushed Finland into a deep recession, with private consumption and investment as well as exports plunging in the first half of the year. Absent a second virus wave, the decline in GDP will be smaller and the subsequent increase greater. A gradual recovery will be led by exports and consumption. Investment will be slower to recover owing to weakened balance sheets, low capacity utilisation and high uncertainty. In the event of a second virus wave, GDP is projected to fall by 9.2% in 2020 and to increase by only 2.4% in 2021.  

France: France is facing a deep recession, as consumption and investment fell sharply during the confinement period. If the pandemic is contained by the summer, real GDP will fall by about 11.4% in 2020 and rebound by 7.7% in 2021. Yet, if there is a second virus outbreak in autumn, GDP is projected to decrease by 14.1% in 2020 and to rebound by 5.2% in 2021. Policy measures such as the strengthened short-time work scheme will help contain the rise in the unemployment rate, but it is set to peak at respectively 12.4% and 13.7% by end-2020 in the two scenarios. Despite government support, investment and consumption will recover only progressively since high uncertainty is set to persist. The fiscal deficit will reach 10.4% and 12.0% of GDP in 2020 in the two scenarios, and the downturn will push the debt-to-GDP ratio (Maastricht definition) to 116% and 126% by end-2021.

Germany: The German economy is facing a deep recession. The fall in GDP is estimated at 6.6% if the virus subsides by the summer. if a second COVID-19 outbreak requires further containment measures or prolongs uncertainty, GDP will decrease by 8.8% in 2020.

Greece: The COVID-19 pandemic and containment measures are projected to reduce GDP by 8% in 2020 if there are no further virus outbreaks , before it recovers by 4.5% in 2021. If there is a second virus outbreak later in the year , the fall in GDP in 2020 will amount to 9.8%.

Hungary: In the single-hit scenario, where there are no further outbreaks, GDP is expected to fall by 8% and the recovery would be faster. Economic activity is projected to fall by 10% in 2020 if there is another virus outbreak later in the year but should recover in 2021, bolstered by the release of pent-up demand.  

Ireland: The economy is set to contract strongly in the first half of 2020 . If a further outbreak is avoided , GDP would fall by 6¾ per cent in 2021 and then recover by 4¾ per cent in 2021.  The second wave of virus assumed in the double-hit scenario entails additional business closures and job losses, delaying the recovery and threatening to entrench long-term unemployment and risk aversion by firms. If this were to occur, annual GDP would decline by 8¾ per cent in 2020 with virtually no recovery in 2021.

Italy: If further outbreaks are avoided , GDP is projected to fall by 11.3% in 2020 and to recover by 7.7% in 2021. GDP is projected to fall by 14% in 2020 before recovering by 5.3% in 2021 if there is another virus outbreak later this year .  

Latvia: Economic growth slowed before the pandemic started and is projected to contract sharply in 2020, despite a relatively lenient lockdown. Activity will recover, but gradually, as uncertainty will remain high and activity in some service sectors will remain subdued. Domestic demand will drive the recovery, while exports will be slower to pick up due to the severe recession in Europe. Investment will drop and stay low throughout 2021, particularly should a second lockdown be necessary . Unemployment is projected to increase and remain elevated due to a slow recovery of labour-intensive sectors. Public debt will soar but will stay low relative to other OECD countries.

Lithuania: The economy is projected to contract sharply as the COVID-19 pandemic drags down both domestic and external demand. GDP growth is expected to decrease by 8.1% . In a scenario that assumes a second virus outbreak occurs later in the year, GDP growth is expected to shrink by 10.4% in 2020. GDP growth will rebound as confidence and world trade pick up, boosting consumption and investment. Unemployment will rise, but despite some gradual decline, it will remain above the pre-crisis level.

Luxembourg: The COVID-19 pandemic has led to a sharp contraction of the economy. If the virus subsides by the summer , GDP is projected to shrink by 6.5% in 2020, as a consequence of measures put in place to contain the spread of the COVID-19 pandemic, and then recover by 3.9% in 2021. If there is a new virus outbreak later this year , GDP would drop by 7.7% in 2020 and rebound by only 0.2% in 2021. In both scenarios, the recovery will be supported by domestic demand and, to a lesser extent, by exports. The unemployment rate would reach a level close to 7.5% in the single-hit scenario and 8.6% in 2021 in the double-hit scenario.

Netherlands: The economy has been hard hit by the COVID-19 virus. Output is set to shrink by 8% in 2020 before picking up in 2021 if the current outbreak is overcome and restrictions are gradually lifted from mid-May . If there is a second wave of the virus later in 2020, GDP is expected to decrease by 10% and the rebound will be considerably slower  The fall is driven by domestic demand in both scenarios, including private consumption and investments. Pent-up consumption demand will drive the initial pick-up, with investment lagging due to spare capacity and lingering uncertainty, but output will remain below pre-crisis levels by the end of 2021 in both scenarios. Unemployment will remain well above 2019 levels throughout 2021.

Poland: Strict confinement measures have taken a heavy toll on the economy. Assuming the current pandemic wanes progressively and further outbreaks are avoided , GDP is projected to contract by 7.4% in 2020, followed by a rebound of 4.8% in 2021. In the equally likely double-hit scenario, a second outbreak later in the year and renewed containment measures will lead to significantly weaker growth outcomes: a 9.5% contraction in 2020 and a 2.4% recovery in 2021.

Portugal: Assuming a single wave of the pandemic , GDP is expected to decline by 9.4% in 2020, with a rebound of 6.3% in 2021. Should a second pandemic outbreak hit at the end of 2020, the  economy is projected to shrink by 11.3%. In the double-hit scenario, the recovery will be slower due to prolonged export weaknesses, heightened uncertainty, additional bankruptcies, and prolonged unemployment spells. By the end of 2021, public debt (Maastricht definition) is expected to increase to 131% of GDP if the virus outbreak subsides by this summer and 138% of GDP if there is a second wave later this year.

Romania: Should a second wave of the pandemic be avoided, GDP would fall by 6.5%. If a second virus outbreak takes place by the end of 2020, GDP is projected to decrease by 8.6%. These negative shocks will have a long-lasting impact on the economy in both scenarios, with GDP remaining below its pre-crisis level at the end of 2021. The recovery will be slower in case of a second outbreak due to a more pronounced deterioration of the labour market and steeper losses in productive capacity.

Slovakia: The economy has been hit hard by the current crisis, even if the country has so far successfully managed to contain the pandemic. Plummeting world trade and massive disruption to global value chains has hurt the export-dependent manufacturing sector. GDP will contract by 9.3% if the current outbreak subsides and another wave is avoided.  In case of a new outbreak later this year , GDP will fall by more than 11% in 2020.  The recovery will be hampered by heightened uncertainty and high unemployment.

Slovenia: Containment measures to prevent the spread of the COVID-19 virus have led to a domestic shock as large parts of the service sector closed while a negative international demand shock curtailed production in the manufacturing sector that is strongly integrated in international supply chains. In case of the virus outbreak returning later in the year , the second lock-down will have a lasting negative impact on businesses, leading to relatively large shares of underutilized resources at the end of the projection period. In the single-hit scenario, the initial deep shock is followed by a rebound of economic activity, leading to a sustained recovery that quickly reduces unemployment.

Spain: The economy is projected to contract by 11.1% in a scenario assuming that the pandemic subsides by the summer and by 14.4% in 2020 in a scenario with a second virus outbreak later in the year. The economy will rebound 7.5% in 2021 if the pandemic subsides by the summer given more persistent effects on labour markets and the financial situation of firms and households but will only rebound 5% in case there is a second outbreak. In both scenarios, the fall in domestic demand, due to job destruction and the shutdown of activity, is the key driver of the contraction. The drop in external demand, especially in tourism services, will also weigh very strongly on the economy in 2020.

Sweden: The COVID-19 pandemic has triggered a severe recession. GDP is expected to fall by 6.7% is the outbreak subsides by summer and by 7.8% in 2020 assuming another virus outbreak later in the year . While containment measures have been less stringent than in most other OECD countries, private consumption has fallen markedly and is set to recover only slowly. Both disruptions to supply chains and tumbling demand have led to stoppages in industry. Export weakness is expected to linger, and the investment slump even more so, as high uncertainty compounds the effect of weak demand.