Impact of COVID-19 on the European Economy Research and Forecast 2019-2025

Europe is among the largest economies across the globe in terms of industrial production. The GDP of the European Union (EU) was estimated to be $18.8 trillion in 2018, increased from $17.4 trillion in 2017, represented nearly 23% of global GDP. This result owing to the remarkable focus towards the production of all finished goods and services within the country. In 2018, EU industrial production surpassed the level that was observed in 2008. More than 75% of the value of sold production in EU 28 was generated by six member states, including Germany, Italy, France, UK, Spain, and Poland with 28%, 16%, 12%, 9%, 8%, and 5%, of total EU respectively (Eurostat).

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The region has a significant production of food products, motor vehicles, machinery and equipment, and basic metals and fabricated metal products. In 2018, the production of food products in EU 28 increased by nearly 117 billion (16%) compared with 2008. In addition, there is a considerable production of machinery and equipment, such as construction and transportation equipment in European countries, including UK and Germany. According to the Office for National Statistics (ONS), in UK, the production of machinery and equipment increased by 1.8% and reached nearly $36 billion in 2018. However, European countries are currently facing a recession due to factory shutdown and shortage of raw material amid the COVID-19 outbreak. After China, European countries, including Italy, Spain, and UK are highly affected by COVID-19 pandemic.

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Due to the epidemics of COVID-19, the manufacturers of the automobile, chemical, electronics, and aircraft are facing concerns regarding supply chain disruption. The government orders to suspend production is further affecting industrial output in the region. Several automobile companies, retailers, and machinery and equipment manufacturers have temporarily shut down their factories to minimize the spread of coronavirus. For instance, in Italy, Ferrari S.p.A. has suspended production for two weeks due to Italian government orders for nationwide lockdown due to the COVID-19 epidemic. It is expected that Ferrari and Fiat began producing. Further, Jaguar Land Rover Automotive PLC, a part of Tata Motors, suspended its UK production facility in line with the government advice to reduce the spread of coronavirus.

The study on the impact of COVID-19 on European industry is classified into automobile, food & beverage, machinery, electrical and electronics, aviation, retail and e-commerce, healthcare, travel and tourism, and others. BFSI and automobiles are among the most affected sectors due to the COVID-19 outbreak in the region. European banks were facing financial and debt crises in 2019 and the COVID-19 crisis has created uncertainty in the financial sector. As per the European Banking Authority (EBA), as of June 2019, the weighted average ratio of non-performing loans stood at 3%, rather than 6% in 2015.

The COVID-19 pandemic is expected to worsen the level of bad loans in banks’ balance sheets. Hence, it is expected that several small and medium-sized businesses will struggle to repay their debts and have been forced to close, which, in turn, will more worsen the condition. However, Europe’s central banks are focusing on reviving their economy by offering support to businesses. For instance, during a special meeting of the Monetary Policy Committee (MPC) on 10th March 2020, the Bank of England declared to reduce Bank Rate by 50 basis points from 0.75% to 0.25% to counter the economic shock following from the coronavirus effect. This will support to keep firms in business and support avoiding longer-lasting economic harm.

Key companies getting affected by coronavirus epidemic in the region include ArcelorMittal S.A, BASF SE, BP plc, Daimler AG, Deutsche Lufthansa AG, Fiat Chrysler Automobiles N.V., Robert Bosch GmbH, Royal Dutch Shell PLC, Tesco PLC, Total S.A., and Volkswagen AG. A large number of companies apart from pharmaceutical companies are working toward manufacturing medical equipment including ventilators and PPE kits. For instance, car companies including Ferrari, Fiat, Magneti Marelli are supporting the production of ventilators in Italy. Apart from automakers, aviation firms are also expected to join ventilator production to cope up with the increasing demand.

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Verticals Affected Most

• Automobile
• Food & Beverage
• Machinery
• Electrical and Electronics
• Aviation
• BFSI
• Retail and E-Commerce
• Healthcare
• Travel and Tourism
• Others

Country Analysis

• Italy
• Spain
• UK
• Germany
• France
• Rest of Europe

Company Profiles

• Airbus SE
• Anheuser-Busch InBev
• ArcelorMittal S.A
• BASF SE
• BP plc
• Carrefour S.A.
• Daimler AG
• Deutsche Lufthansa AG
• F. Hoffmann-La Roche AG
• Fiat Chrysler Automobiles N.V.
• Glencore plc
• ING Groep NV
• Nestlé S.A.
• Novartis AG
• Robert Bosch GmbH
• Royal Dutch Shell PLC
• Tesco PLC
• Total S.A.
• Volkswagen AG

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