an Outbreak of coronavirus threatens to plunge France and Italy into recession, writes Bloomberg.
“a longer and more widespread the epidemic may have a disproportionately negative impact through uncertainty and financial market channels, the document says the European Commission about the economic impact of the virus at the disposal of the Agency. — Cascading effects can be caused by a lack of liquidity in the companies that are forced to stop production, which increases and spreads financial markets”.
“non-performing loans, especially companies with a high proportion of borrowed funds, working with limited cash flow may increase, especially if it continues for more than three months, — the document says. — Other possible indirect effects include, for example, the effect of correction of stock market wealth and consumption”.
France and Italy may face a technical recession in the first quarter after a decline of GDP of both countries in October-December last year, the document says the Commission.
“Recent events show that the assumptions about V-shaped recovery after the first quarter and limited the secondary effects outside of China may have to reconsider,” warned officials.
the Organization for economic cooperation and development (OECD) this week lowered the growth forecast for the Eurozone GDP for 2020 from 1.1% to 0.8%. In 2021, the economy of the bloc, expected to grow by 1.2%.
According to experts, in the next decade, the Eurozone economy is very weak.
Trade tensions, political uncertainty in Germany and Brexit already affected the economy of the Eurozone. The rapid spread of the virus COVID-19 will affect the growth forecasts in the Eurozone in the short term and force the European Central Bank to act, economists say ING.