Great Recession in Europe

ECB publishes consolidated banking data for end-December 2020

Retrieved on: 
Friday, June 25, 2021
Eurozone crisis, Post-2008 Irish economic downturn, Great Recession in Europe

The annual data cover information required for the analysis of the EU banking sector, comprising a subset of the information that is available in the year-end dataset.

Key Points: 
  • The annual data cover information required for the analysis of the EU banking sector, comprising a subset of the information that is available in the year-end dataset.
  • The end-December 2020 data refer to 327 banking groups and 2,593 stand-alone credit institutions operating in the EU (including foreign subsidiaries and branches), covering nearly 100% of the EU banking sector balance sheet.
  • Accordingly, aggregates and indicators may also cover data based on national accounting standards, depending on the availability of the underlying items.
  • A few revisions to past data are disclosed together with the end-December 2020 data.

Driving Tests (Repayment of Test Fees)

Retrieved on: 
Wednesday, February 3, 2021
Foreign relations of Iceland, Great Recession in Europe, Iceland–Netherlands relations, Iceland–United Kingdom relations

Latest news on the Driving Tests (Repayment of Test Fees) Bill 2019-21

Key Points: 
  • Latest news on the Driving Tests (Repayment of Test Fees) Bill 2019-21

    The next stage for this Bill, Second reading, is scheduled to take placeon a date to be announced.

  • This is a Private Members'Billand waspresented to Parliament on Tuesday 2 February 2021.
  • If the text of the Bill is not yet available, please contact its sponsor,Kirsten OswaldMP, for more information.
  • Summary of the Driving Tests (Repayment of Test Fees) Bill 2019-21

    A Bill to authorise the repayment of fees for driving tests delayed as a result of an emergency.

The initial fiscal policy responses of euro area countries to the COVID-19 crisis

Retrieved on: 
Wednesday, February 3, 2021
European Union, Eurozone, Economy, Fiscal policy, Units of time, European Central Bank, Great Recession in Europe, Keynesian economics, Austerity, European Union stimulus plan

Prepared by Stephan Haroutunian, Steffen Osterloh and Kamila Sawiska Euro area countries have relied extensively on fiscal policy to counter the harmful impact of the coronavirus (COVID-19) pandemic on their economies.

Key Points: 
  • Prepared by Stephan Haroutunian, Steffen Osterloh and Kamila Sawiska Euro area countries have relied extensively on fiscal policy to counter the harmful impact of the coronavirus (COVID-19) pandemic on their economies.
  • Since all euro area countries were hit by the economic shock largely through the same channels, their fiscal responses in the early stages of the crisis were similar in terms of the instruments used.
  • Fiscal emergency packages were mostly aimed at limiting the economic fallout from containment measures through direct measures to protect firms and workers in the affected industries.
  • In order to support the recovery, fiscal policy needs to provide targeted and mostly temporary stimulus, tailored to the specific characteristics of the crisis and countries fiscal positions.

1 Introduction

    • This article discusses the initial fiscal policy responses of euro area countries to the COVID-19 crisis and the implications for further policy measures.
    • It examines the specific fiscal policy measures taken in the course of 2020 and elaborates on the experiences of euro area countries during the pandemic.
    • The article finds that successful recovery strategies from previous crisis episodes cannot be replicated without being adapted to the current crisis circumstances.
    • Looking forward, it discusses the implications for the fiscal stance and considers the main policy questions such as the design and timing of fiscal measures.
    • These two types of fiscal measure affect both the expenditure and the revenue side of government budgets (see Table 1).
Table 1

    Categories of fiscal instrument
    • Those measures were aimed at supporting the firms and households particularly affected by the health crisis.
    • Section 2 presents the overall fiscal policy response during the initial phases of the crisis.
    • Budgetary and liquidity measures on the expenditure side are discussed in Sections 3 and 4 respectively.
    • Sections 5 and 6 give an overview of budgetary and liquidity measures on the revenue side.
    • Section 7 elaborates on the challenges associated with the assessment of the fiscal stance using standard measures, and Section 8 concludes.

2 Budgetary impact of fiscal responses

    • The fiscal deficits and the contraction in GDP led to an increase in the euro area debt ratio from 85.9% of GDP in 2019 to a projected 101.7% of GDP in 2020.
    • The deterioration in fiscal balances partly reflects the operation of automatic stabilisers, which are designed to dampen the effects of the economic cycle.
    • According to European Central Bank (ECB) estimates, these account for around one-third of the large budget deficit in 2020.
    • [1] But the worsening of the fiscal outlook is principally a result of the discretionary fiscal measures adopted since the outbreak of the crisis.
    • However, these projections are subject to exceptionally high uncertainty, as they depend, inter alia, on the course of the pandemic.
Chart 1

    Projected change in the euro area and euro area countries’ budget balances relative to the preceding year (percentages of GDP)
    • Fiscal measures were implemented via sequences of fiscal packages that reflected the change in priorities over the course of 2020.
    • These packages aimed to address the health crisis and to support the sectors most hit by lockdown measures.
    • Later, some of the countries announced further fiscal packages to extend the liquidity and emergency measures included in the first package.
    • 3.9% of GDP) and in September France launched its France Relance package comprising measures worth 100 billion, (i.e.
    • Later, around mid-October, several other Member States announced in their draft budgetary plans for 2021 additional measures for 2021 and subsequent years.
    • Overall, the timing of the recovery packages is much more heterogeneous than that of the emergency measures taken in the spring.
Figure 1

    Largest fiscal packages announced in the euro area
    • Quantifying the discretionary fiscal measures in response to the COVID-19 crisis and comparing them across countries is subject to major challenges.
    • First, there is no consistent track record of the measures that countries have implemented.
    • [2] The stability programmes published in spring 2020 did not provide full details on fiscal measures, especially in the longer term, as countries considered uncertainty to be too high.
    • Second, statistical recording of the often unprecedented measures is challenging, even with Eurostat providing guidance.
    • [3] All reporting countries had legislated for substantial fiscal packages in 2020, with a weighted average of slightly above 4% of GDP.
    • However, as mentioned above, the cross-country comparison is cumbersome owing to heterogeneity in the reporting of the measures.
Chart 2

    Sum of fiscal measures related to COVID-19 with a budgetary impact in 2020 compared with gross discretionary stimulus in 2009 (percentages of GDP)
    • By comparison, at the height of the Global Financial Crisis (GFC) in 2009, the overall amount of discretionary stimulus in EU countries amounted to 1.5% of GDP.
    • [5] Moreover, the heterogeneity of measures appears to have been larger during the GFC than in the COVID-19 crisis.
    • In 2009 stimulus measures reached over 3% in Luxembourg, while some countries did not provide any stimulus at all, even implementing considerable consolidation measures.
    • In Chart 3, the composition of aggregate discretionary fiscal measures in the euro area is estimated based on information provided in the DBPs for 2021.
Chart 3

    Estimated composition of measures related to COVID-19 in 2020
    • For 2021, the overall amount of planned discretionary measures reported in the DBPs is substantially smaller and more heterogeneous across Member States compared with that for 2020.
    • On average, the size of the concrete discretionary measures included in the DBPs amounts on average to slightly above 1% of GDP.
    • Among the larger Member States, Germany stands out with measures amounting to 2.1% of GDP in 2021.
    • For the euro area as a whole, the decline compared to 2020 mostly reflects the planned unwinding of the bulk of emergency measures.
    • In particular, additional support measures for firms appear likely in the case of new lockdowns, as already observed in autumn 2020.
    • They facilitated companies access to external financing and allowed them to shift tax obligations to when normal activity resumes.

3 Budgetary measures on the expenditure side

    • Such schemes aim to prevent the loss of human capital and stabilise consumption for those who would have become unemployed.
    • Moreover, the extension of such schemes supports private demand and business confidence during the recovery phase.
    • Moreover, such State aid measures need to address competition concerns, as differing approaches across countries might impair the Single Market.
    • The effectiveness of other spending measures to support private demand is hampered by the COVID-19 crisis.
    • The emergency measures supported incomes and allowed households to maintain their living standards to a large extent.
    • However, as a consequence of the containment measures, their immediate impact on consumption was reduced.
    • These measures prevented consumers from making purchases and led to a strong increase in the saving ratio particularly in the higher income groups.
    • In fact, several countries have already taken measures consisting of targeted transfers to certain households, such as families or the unemployed.
    • Such measures can be assumed to have a stronger impact insofar as they target households with a higher propensity to consume.
    • Most of this expenditure should be spent on investment and growth-enhancing structural reforms (see Box 1).
    • [21] The experience has shown that the implementation of sufficiently large, timely and properly designed green stimulus measures can generate economic growth while also delivering environmental benefits.

4 Liquidity measures on the expenditure side

    • In the early phase of the COVID-19 crisis, loan guarantees were the predominant instrument used to address firms liquidity shortages.
    • Such guarantees aimed to avert liquidity shortages for firms particularly affected by the containment policies, in particular SMEs.
    • In addition, several Member States provided additional liquidity to firms in the form of loans through State-owned development banks.
    • At the euro area level, announced guarantees amounted to over 16% of GDP (see Chart 4).
Chart 4

    Guarantees (percentages of GDP in 2019)
    • The guarantees granted to the financial sector during the GFC mainly aimed at restoring confidence and ensuring the proper financing of the financial sector.
    • Commitments for those guarantees amounted to about 18% of GDP in 2010,[23] a similar dimension as current guarantees to non-financial corporations.
    • Moral hazard arose as guarantees reduced banks incentives to screen and monitor the quality of loans, leading to riskier loans as firms undertook riskier projects.
    • In principle, moral hazard concerns could arise if banks replace existing problematic loans from before the crisis with new ones guaranteed by the State.
    • Moreover, the extensive fiscal support to firms can partly compensate their losses during the pandemic.

5 Budgetary measures on the revenue side

    • Under the assumption of full pass-through, the VAT cut in Germany would reduce euro area HICP inflation in July 2020 by around 0.6 percentage points.
    • [28] However, the actual impact of this measure is uncertain, as it is temporary and taken in a situation of weak economic activity and high uncertainty.
    • Overall, in that specific case, a temporary VAT cut was successful in bringing forward consumption of durable goods.
    • [30] The continued health restrictions and behavioural changes posed some challenges to the operation of temporary VAT cuts as stimulus policy.
    • Most notably, France has announced a reduction in production taxes in 2021 in order to improve the competitiveness of firms.
    • Such temporary and targeted measures can be efficient instruments to support labour reallocation in the recovery phase.

6 Liquidity measures on the revenue side

    • Very early on in the pandemic, all euro areas countries took measures to relieve the immediate tax payments of firms severely affected by the lockdowns.
    • Typically, such measures did not reduce the overall tax obligations of firms but shifted the payment dates from the time of the broad lockdowns in the first half of the year to later dates, thus providing additional liquidity to firms.
    • However, the overall effect of these measures on the budget balance in 2020 is relatively small for two reasons.
    • Tax-related liquidity measures were an efficient instrument to increase the liquidity of firms.
    • As tax obligations typically only react with a delay to changes in revenues, such tax measures serve as a stabiliser for firms earnings.

Box 1 EU reaction to the COVID-19 crisis

    • Prepared by Stephan Haroutunian The response of the European Union (EU) to the coronavirus (COVID-19) crisis has been unprecedented and significantly complements the fiscal measures taken at the national level.
    • The EUs response has also been tailored to the challenges arising in the different phases of the crisis.
    • It thus allows them to undertake the budgetary measures needed to achieve a counter-cyclical response in a situation of generalised crisis caused by a severe economic downturn in the euro area or the EU as a whole.
    • The ECOFIN Council activated the clause for the first time since its inclusion in the rules in 2011.
    • Measures are aimed at ensuring that the EU rules-based framework is supportive of the implementation of emergency measures.
    • With regard to the EU budget, the European Commission set up the Coronavirus Response Investment Initiative, which allows the use of funds under the EUs cohesion policy to address the consequences of the COVID-19 crisis.
    • Safety nets for sovereigns in the euro area: To safeguard euro area countries financing, the Pandemic Crisis Support tool was developed.
    • The aim of this tool is to ensure access to financing during the crisis.

7 Implications for the fiscal stance

    • The interpretation of the fiscal stance for 2020 and 2021 is challenging owing to the one-off impact of the emergency measures.
    • As shown above, the overall amount of fiscal measures specified in the DBPs for 2021 is substantially lower than that for 2020.
    • However, this mainly results from the expiry of the fiscal emergency measures, which have different economic implications from standard stimulus measures, with a more durable positive effect on growth.
    • The substantial fiscal measures taken in 2020 counteracted the output losses related to the crisis.
    • As shown above, the specific features of the COVID-19 crisis had an impact on the effectiveness of fiscal measures.
Chart 5

    Fiscal loosening in 2020 and initial fiscal position (percentages of GDP)
    • The favourable macroeconomic developments observed up to 2020 induced some euro area countries to reduce their budget deficits and build substantial fiscal buffers.
    • In particular, countries with a favourable starting position in terms of a positive budget balance and lower debt level were able to provide considerable support to the economy in a timely manner (see Chart 5).
    • Looking forward, the NGEU package will provide additional stimulus in 2021-26 on top of national measures shown above.
    • The additional investment spending of the NGEU is expected to provide additional stimulus for Member States in the years 2021 to 2026.
    • However, it will not be reflected in the their deficits but will lead to fiscal liabilities at the EU level.

8 Conclusions and policy implications

    • Given the specific nature of the crisis, it is assumed that those instruments were well targeted to the specific challenges of the first crisis phase of broad lockdowns.
    • The recovery needs to be supported by appropriate measures which take into account the future path of the pandemic and the effectiveness of policy instruments.
    • For 2021, the amount of stimulus announced in the DBPs differs substantially across Member States.
    • Consequently, additional stimulus measures could support the recovery in the medium run but should not hamper necessary structural changes to the economies.
    • In fact, the impact of the funds on growth will be magnified if they are accompanied by appropriate structural policies.

Financial stability considerations arising from the interaction of coronavirus-related policy measures

Retrieved on: 
Wednesday, November 25, 2020
Public finance, Fiscal policy, Economy, Monetary policy, Money, Great Recession in Europe, Articles

Fiscal, prudential and monetary authorities have responded to the coronavirus pandemic by providing unprecedented support to the real economy.

Key Points: 
  • Fiscal, prudential and monetary authorities have responded to the coronavirus pandemic by providing unprecedented support to the real economy.
  • Importantly, the combination of policy actions has done more to limit the materialisation of risks to households and firms than each policy individually.
  • Exploiting policy complementarities and ensuring the most effective combination of policies will, however, be equally important when authorities start to phase out the various relief measures.

1 Introduction

    • The sheer size of the measures, as well as their mutually beneficial effects, has provided vital support to the economy.
    • [1] Monetary policy measures have supported the supply of credit to the real economy and ensured favourable financing conditions.
    • At the same time, fiscal policies have helped many borrowers to bridge urgent liquidity needs and have stabilised aggregate demand.
    • In turn, this has supported financial stability by preventing many firms and households from defaulting on their loans.
    • Among the five largest euro area countries, the scale and combination of measures varies substantially, as do their phase-out schedules.

2 Enacted policy measures

    • The ECB has announced monetary policy measures aimed at maintaining accommodative financing conditions.
    • The pandemic-related monetary policy measures include the pandemic emergency purchase programme (PEPP), targeted longer-term refinancing operations (TLTROIII) at more favourable terms and conditions,[2] non-targeted pandemic emergency longer-term refinancing operations (PELTROs) and the easing of the collateral rules.
    • In some countries, measures have also been taken to restrain firms from laying off employees (e.g.Italy and Spain) or temporarily lift obligations to file for insolvency (Germany).
    • In addition to national policies, further fiscal and labour market-related relief measures have been agreed at the EU level.
    • The main prudential measures have included the release of capital buffers, guidance to reduce procyclical provisioning[9] and measures to preserve banks loss-absorbing capacity by restricting dividend distributions.


    The policy response varies across euro area countries. Fiscal and some prudential measures are set at national level and have varied across countries in terms of envelopes and eligibility criteria. Some countries have relied heavily on short-time working schemes to support firms and household incomes, while others have made greater use of moratoria and guarantee schemes (see Chart A.1).[11]

3 Combined impact of complementary measures

    • The fiscal, monetary and prudential policy measures aim to support economic activity by reducing the financial stress faced by households and corporates.
    • The various relief measures all share the aim of helping firms and households.
    • Their positive effect on the payment performance of bank borrowers indirectly supports the soundness of banks, at least in the short run.
    • Vulnerable households are supported by measures that buttress incomes, prevent unemployment from rising and alleviate debt servicing needs.
    • [13] Corporate defaults and insolvencies are mitigated by measures that support liquidity and contain expenses.
    • The impact of policies has been stronger in Italy and Spain than in France and Germany.
    • The macro-financial impact of the different policies can be simulated using a macroeconomic model enhanced by bank, firm and household-level modules.
    • The baseline scenario used for the calculations is consistent with the September 2020 ECB staff macroeconomic projections, abstracting from the estimated impact of the policies assumed in the projections.
    • The policy assumptions have been updated on the basis of the most recent data available for the five largest euro area countries.
    • The incorporation of monetary policy measures follows the approach described in the May 2020 issue of the Financial Stability Review.
    • [19] Support measures have helped maintain bank lending capacity and reduce the risk of severe financial instability.
    • [20] Taken together, the enacted policy measures are expected to significantly improve economic growth.
    • [22] Chart A.3 Heterogeneous timing and composition of the relief provided to the banking sector and the real economy by different policy measures
    • Prudential policies have facilitated the use of fiscal measures.
    • The relaxation of prudential policies has provided capital space to cover the remaining credit risk that was left with the banks.
    • At the same time, the prudential measures have reinforced the effectiveness of the additional extraordinary monetary policy easing.
    • Simulations indicate that the mitigating contribution of monetary policy measures, and their impact on banks liquidity and funding, to the real GDP level at the end of 2021 would be about 0.3 percentage points lower without prudential policies (see ChartA.4).
    • Chart A.4 Prudential policies enhanced the mitigating impact of fiscal and monetary policies Contributions of guarantees and monetary policy to real GDP levels by end-2021 with and without relaxation of the prudential buffer requirements (level deviation, percentage points)

4 Phase-out strategies, cliff effects and risks ahead

    • Direct support and tax deferral measures have already been phased out in some countries, and new applications for public loan guarantees would be possible only until end-2020 in many countries.
    • The phase-out of short-time working schemes and loan moratoria[25] varies more across countries, ranging from the end of 2020 to the end of 2021 (see ChartA.5).
    • This applies not only to moratoria and tax deferrals, but also to guaranteed loans with shorter maturities.
    • Chart A.5 Most of the policies will be phased out by the first half of 2021 Timeline for the phase-out of different policies
    • Ending measures abruptly could lead to cliff effects on households and corporates income, with knock-on effects for economic activity in 2021.
    • The simultaneous termination of policy measures could trigger a protracted downward shift in the recovery path.
    • On aggregate, the main sources of potential cliff effects are reductions in short-time working schemes, direct grants and tax support, reflecting their relevance in sustaining income and thus expenditures at the household and corporate levels.
    • Chart A.6 Exiting measures simultaneously may induce cliff effects in policy support, with stronger GDP reductions in countries relying more on loan moratoria and grants
    • These cliff effects would be exacerbated if tighter pandemic containment measures led to a renewed decline in corporate and household incomes.
    • If the recovery included in the projections fails to materialise, but turns out to be more protracted instead, the cliff effects could be substantially larger and potentially postponed by the prolongation of current policy measures.
    • Countries relying more on moratoria, direct support and tax deferrals appear more exposed to cliff effects in policy support for 2021.
    • By contrast, the strong reliance in France and Spain on guarantee schemes mitigates the cliff effects in 2021, while the impact could be further alleviated by the extension of short-time working schemes in these countries.
    • [27] Overall, tax relief measures will be an important determinant of the timing and magnitude of a cliff effect in policy support for the majority of countries.
    • Chart A.7 A large share of banks loan books is affected by guarantees and moratoria, with banks capital adversely affected by the phasing-out of policy support

Obalon Announces Second Quarter 2020 Financial Results

Retrieved on: 
Thursday, July 30, 2020
Economic policy of Donald Trump administration, Great Recession in Europe

Net loss for the second quarter of 2020 was $4.2 million, compared to $6.8 million for the second quarter of 2019.

Key Points: 
  • Net loss for the second quarter of 2020 was $4.2 million, compared to $6.8 million for the second quarter of 2019.
  • Net loss per share for the second quarter of 2020 was $0.54, compared to $2.52 for the second quarter of 2019.
  • Cost of revenue was $0.4 million for the second quarter of 2020, down from $0.7 million for the second quarter of 2019.
  • Gross profit for the second quarter of 2020 was $0.3 million, compared to a gross deficit of $0.3 million for the second quarter of 2019.

Article - Covid-19: 10 things the EU is doing to ensure economic recovery

Retrieved on: 
Wednesday, July 22, 2020
European Union, Impact of the COVID-19 pandemic, Economy of Europe, Decades, Economy of the European Union, Eurozone, Stock market crashes, Great Recession in Europe, European Union response to the COVID-19 pandemic, European debt crisis

Read our timeline of EU measures to tackle Covid-19 for an overview of everything the EU is doing to help Europe cope with the crisis.1. Providing massive economic stimulus To help Europe recover from the devastating economic repercussions wrought by the coronavirus pandemic, the European Commission has proposed a 750 billion stimulus plan, coupled with a revised proposal for the EU's next long-term budget (2021-2027).

Key Points: 


Read our timeline of EU measures to tackle Covid-19 for an overview of everything the EU is doing to help Europe cope with the crisis.

1. Providing massive economic stimulus

    • To help Europe recover from the devastating economic repercussions wrought by the coronavirus pandemic, the European Commission has proposed a 750 billion stimulus plan, coupled with a revised proposal for the EU's next long-term budget (2021-2027).
    • The Parliament insists that the Green Deal is at the heart of the recovery package and wants to avoid burdening future generations.

2. Supporting EU health systems and infrastructures

    • With several experts mentioning the possibility of a second wave or future pandemics, buttressing the EUs response capacity to health crises is key.
    • To help Europe cope with future outbreaks, the EU launched the new EU4Health programme, which will bolster member states healthcare systems as well as fostering innovation and investment in the sector.
    • The Parliament had insisted on the creation of a new stand-alone European health programme.

3. Protecting small and medium-sized businesses


    Small and medium-sized enterprises represent 99% of all businesses in the EU, making their survival crucial to the EU’s economic recovery. The EU unlocked €1 billion from its European Fund for Strategic Investments to incentivise banks and lenders to provide liquidity to more than 100,000 European small businesses.

4. Mitigating unemployment risks


    Jobs have been hard hit by the pandemic, with unemployment figures rising dramatically. To help workers in the wake of the Covid-19 crisis, the EU’s Support mitigating Unemployment Risks in Emergency (Sure) initiative will provide financial assistance of up to €100 billion to member states in the form of loans granted on favourable terms to help cover the costs of national short-time work schemes.

5. Supporting the tourism industry

    • Another sector badly affected by the pandemic is tourism.
    • Europe is the worlds number one tourist destination and the EU introduced a series of measures designed to help the industry cope during the crisis, as well as a package to reboot Europe's tourism in 2020 and beyond.
    • Relief measures for the transport sector were also introduced, to minimise the effects of the pandemic on airlines, railways, road and shipping companies.

6. Banking package to support households and businesses


    To ensure banks continue providing loans to businesses and households to mitigate the economic fallout from the crisis, the Parliament approved a temporary relaxation of prudential rules for European banks. Changes to to the capital requirements regulation will enable pensioners or employees with a permanent contract to get loans under more favourable conditions, ensure credit flows to small and medium-sized enterprises and support infrastructure investment.

7. Supporting agriculture and fisheries

    • Measures include supporting fishermen and aquafarmers who have had to stop their activity during the crisis and an increasing the support EU countries can give to small firms dealing with farm food.
    • Exceptional market measures were also introduced to support EU wine, fruit and vegetable producers.

8. Helping countries fund their crisis response


    To help member states fund their coronavirus crisis response, the EU launched a new initiative, the Coronavirus Response Investment Initiative. It will channel some €37 billion from EU structural funds to provide immediate financial support to EU countries trying to help people and regions face the current crisis.

9. Relaxing state aid rules


    As the pandemic was beginning to spread throughout Europe, the EU launched a Temporary Framework on State Aid rules to ensure sufficient liquidity remains available to businesses of all types and help maintain economic activity during and after the Covid-19 outbreak. Member states will be able to grant up to €800,000 to a company to address urgent liquidity needs or grant loans with favourable interest rates.

10. Protecting weakened European businesses from foreign competitors

Economic Indicators, June 2020

Retrieved on: 
Friday, July 3, 2020
Economy, Decades, Business cycle, Recession, History by period, Unemployment, Economy of the European Union, Great Recession in Europe, Economy of the United Kingdom

Analysis of the latest UK and international economic indicatorsDownload the full reportEconomic update: Unprecedented fall in GDP marks low point of recession The magnitude of the recession caused by the coronavirus outbreak is now more evident. GDP was around 25% lower during the depth of the crisis in April than in February. While a recovery is underway, there is uncertainty over how fast economic activity is regaining lost ground and how high unemployment levels will rise.GDP falls by a quarterGDP, which is the total value of all goods produced and services provided in the UK, was 25% lower in April compared to February.

Key Points: 


Analysis of the latest UK and international economic indicators

Download the full report

    Economic update: Unprecedented fall in GDP marks low point of recession


      The magnitude of the recession caused by the coronavirus outbreak is now more evident. GDP was around 25% lower during the depth of the crisis in April than in February. While a recovery is underway, there is uncertainty over how fast economic activity is regaining lost ground and how high unemployment levels will rise.

    GDP falls by a quarter

      • GDP, which is the total value of all goods produced and services provided in the UK, was 25% lower in April compared to February.
      • From March to April, GDP fell 20.4%.
      • This is by far the biggest decline in the official monthly GDP data series (available from 1997).

    Some sectors hit particularly hard

      • The services sector experienced a 24% drop between February and April, while manufacturing output declined by 28%.
      • The largest decline was in the accommodation and food sector, with output 92% lower in April compared with February.
      • Output in the arts and entertainment sector dropped by 47%, while in construction it was 44% lower.
      • Output in the information and communication sector was down by 15% and financial services saw a 6% decline.

    Recovery is under way…

      • For example, most non-essential retailers have been allowed to reopen from 15 June.
      • Retail sales were up 12% in May compared to April, underpinned by rising sales from DIY stores (as they re-opened) and internet sales.
      • Overall retail sales levels were still 13% below pre-Covid-19 levels.
      • The closely-watched purchasing managers index (PMI), often used as a proxy for GDP growth, bounced back in May and June.

    …but how strong will it be?

      • These include mobility reports, from Google and Apple among others, and data from debit and credit card spending.
      • The initial rebound from the depths of the recession was to some extent expected as the economy reopened.
      • The key question is how long will it take consumers and businesses to return to pre-Covid 19 levels of spending?
      • The continuation of social distancing and the possibility of the spread of the virus accelerating, pose serious risks to the speed of the recovery.

    The risk of unemployment

      • Unemployment has increased, hours worked fallen and job vacancies declined.
      • Over 9 million jobs have been supported by the Coronavirus Job Retention Scheme (the furlough scheme), with 2.6 million self-employed workers also receiving financial support.
      • 79% of businesses surveyed by the Office for National Statistics say they have applied to use the furlough scheme.
      • The average forecast from economists is for the unemployment rate to reach 8% by the end of 2020, double its pre-virus rate of 4%.

    Government policy announcements

      • In an effort to boost the economic recovery, the Government is announcing a series of policy initiatives.
      • On 30 June, the Prime Minister announced the Governments plans to bring forward around 5 billion of infrastructure spending.
      • The Chancellor is scheduled to provide a summer economic update on Wednesday 8 July, with further details of the Governments plans set to be announced.

    Economic Indicators, May 2020

    Retrieved on: 
    Thursday, May 28, 2020
    Macroeconomics, Economy of the United Kingdom, Inflation, Gross domestic product, Recession, Economy, Eurozone crisis, Great Recession in Europe, Deficit reduction in the United States

    Analysis of the latest UK and international economic indicatorsEconomic update: UK facing ‘severe recession’Large sections are closed for business, household incomes are under pressure and there is deep uncertainty over future economic prospects.

    Key Points: 


    Analysis of the latest UK and international economic indicators

    Economic update: UK facing ‘severe recession’

      • Large sections are closed for business, household incomes are under pressure and there is deep uncertainty over future economic prospects.
      • Earlier this month, the Chancellor told the House of Lords Economic Affairs Committee that the UK was facing a severe recession the likes of which we havent seen.
      • There have been sharp falls in GDP, increases in claims for unemployment-related benefits, and increases in government borrowing of the kind not seen for generations.

    There’s been a sharp fall in GDP

      • Spending by households, by far the largest component of GDP, fell by 1.7% compared with the previous quarter.
      • This is the largest fall since monthly GDP records began in 1997.
      • As noted above, GDP fell in the first quarter of 2020 and will fall further in the second quarter as significant parts of the economy have shut during the lockdown.
      • On average, economic forecasters expect GDP to fall by 7.9% in 2020.
      • This would be the largest fall in GDP since the annual series began in 1948.
      • The largest annual fall in GDP seen to date was 4.2% in 2009.
      • The Office for Budget Responsibility has set out a coronavirus reference scenario in which GDP falls by nearly 13% in 2020.

    Claimant count up by 850,000

      • Most of the available data on the labour market cover the period January to March 2020.
      • Some data are available for April and already show the effects of the lockdown.
      • The number of people claiming unemployment benefits (the claimant count) increased by nearly 70% between March and April, reaching 2.1 million.
      • In the three months to March 2020, the number of weekly hours worked fell by 1.2% (12.4 million hours) compared with a year earlier.
      • Experimental statistics indicate this was mainly due to a fall in the number of hours worked in the last week of March.
      • This was nearly 25% down on the other weeks of 2020.

    Government borrowing hits record high in April

      • The economic effects of the pandemic can also be seen in a sharp rise in government borrowing.
      • Government borrowing was 62.1 billion in April 2020 compared with 10.9 billion in April 2019.
      • This is the highest level of monthly borrowing since official records began in 1993 and is only marginally lower than the level of borrowing in 2019/20 as a whole.

    Inflation down due to lower fuel prices

      • Inflation, as measured by the Consumer Prices Index, was 0.8% in April, down from 1.5% in March.
      • This is the lowest rate of annual inflation since August 2016.
      • The main reasons for the fall in inflation were lower petrol and diesel prices, together with falls in the cost of domestic energy.
      • The lockdown affected the Office for National Statisticss (ONS) ability to measure the prices of all the goods in its basket in April.
      • The ONS has put a range of measures in place to deal with the challenges of measuring the prices of these unavailable goods.

    Further reading


      The Library has looked further into the possible impact of coronavirus on the economy in its briefing, Coronavirus: Effect on the economy and public finances and we continue to update our briefing on the latest economic data. The Library’s UK economy dashboard updates when key economic data are published. The dashboard includes topics such as economic growth, inflation, unemployment and the public finances.

    Intellinetics, Inc. Clarifies Use of PPP Funds to Benefit Employees

    Retrieved on: 
    Monday, April 27, 2020
    Stock market crashes, Great Recession in Europe

    Intellinetics previously announced that it had received a PPP loan in the amount of $838,700.

    Key Points: 
    • Intellinetics previously announced that it had received a PPP loan in the amount of $838,700.
    • Microcap public companies in general, and Intellinetics in particular, have a difficult time raising needed capital, even in good economic times.
    • Under the current economic situation, raising outside debt or equity capital is likely impossible or would involve significantly detrimental terms.
    • Current economic uncertainty resulting from the COVID-19 crisis made the PPP loan request necessary to support the reinstatement of as many of our employees as possible and allowed us to continue our ongoing operations.

    Luis de Guindos: Interview with La Vanguardia

    Retrieved on: 
    Monday, April 13, 2020
    Economy of the European Union, Eurozone, European Union, Economy, Luis de Guindos, Euro, Economy of Europe, Recession, Great Recession in Europe

    INTERVIEWInterview with La VanguardiaInterview with Luis de Guindos, Vice-President of the ECB, conducted by Manel Pérez and published on 12 April 2020 12 April 2020 What is your assessment of the global economic situation in the midst of this coronavirus crisis?

    Key Points: 


    INTERVIEW

    Interview with La Vanguardia

      Interview with Luis de Guindos, Vice-President of the ECB, conducted by Manel Pérez and published on 12 April 2020

        • 12 April 2020 What is your assessment of the global economic situation in the midst of this coronavirus crisis?
        • The global economy will enter recession and so will the European economy, albeit an even more severe one.
        • International bodies have calculated that the economy will shrink by 2% to 3% for each month of lockdown.
        • And coming out the other side of the crisis, what do you think the economic recovery will look like?
        • In any case, 2021 will not be able to make up for all of the downturn in 2020.
        • In Spain, business associations are complaining that the tax payment schedule has remained the same, which could lead to liquidity problems.
        • First of all, its important to remember that the basis for the recovery will depend on successfully protecting the economys productive capacity.
        • What is your opinion on the public loan guarantee programmes to enable the banking sector to finance firms with credit lines and loans?
        • In 2020, asset purchases will reach 1.1 trillion (mainly of public debt) to avoid fragmentation of the euro area.
        • Weve also called for progress in capital markets so that euro area firms have access to more sources of funding.
        • The banking sector is facing this situation from a much more robust position than ten years ago.
        • It is true that it has profitability issues and the deep recession will affect its bottom line.
        • The financial markets experienced some problems during the initial days of this crisis, but they were not caused by the banking sector.
        • The situation has to a certain extent returned to normal, although not completely, while prices have partially recovered and volatility has eased.
        • Yes, to a large extent, the current situation already existed, and in theory mergers offered a solution, but these mergers have not taken place