In the last bulletin of the European Commission, Autumn, it was concluded that the trend for the economic bloc presents a negative projection of 6.1% instead of the 4.2% ex-ante forecast in July. Even so, compared to 2020, overall it is an estimated recovery of 4.1%; Portugal is expected to have the fifth-worst performance of the 27 member states. However, the third-best recovery in 2021 for the entire European Union (EU) is expected.
This results from the pandemic and its inherent economic and social consequences because, despite the tremendous initial impact, the third semester registered an economic improvement; recognizing the gradual lifting of containment and public health measures. However, the very high uncertainty surrounding the evolution of the Covid outbreak 19; regardless of the vaccine, it constrains a complete recovery of the economy. In fact, the EU’s Gross Domestic Product (GDP) is not expected to reach the levels seen before the pandemic in 2022.
Obviously, the economic repercussions are quite different in the Member States, as they illustrate: i) speed of spread of the virus; ii) adopted health policies; iii) structural composition of the business fabric; and, iv) national and European economic stimulus policies. However, there are universal consequences: i) rising unemployment rates; ii) probable increase in the deficit and public debt; and, iii) moderate inflation.
The increase in unemployment decreases family disposable income, with estimates showing 8.3% in 2020, 9.4% in 2021 and 8.9% in 2022; and, the unemployment rate is expected to be 7.7% in 2020, 8.6% in 2021 and 8.0% in 2022. As for the deficit, it will show a marked growth as a result of expenses and a decrease in revenues. Therefore, the aggregate budget deficit is expected to be 8.8% in 2020 and fall back to 6.4% and 4.7% in 2021 and 2022 respectively.
As a result of the widening of the deficit, forecasts of the aggregate debt-to-GDP ratio in the Eurozone show 101.7% in 2020, 102.3% in 2021 and 102.6% in 2022; accompanied by moderate inflation underlying the fall in economic activity. ThAs a result of the widening of the deficit, forecasts of the aggregate debt-to-GDP ratio in the Eurozone show 101.7% in 2020, 102.3% in 2021 and 102.6% in 2022; accompanied by moderate inflation underlying the fall in economic activity. The only items that did not have negative values in this period were the prices of energy and unprocessed food products.