Eurozone public debt will exceed 100% of total GDP for the first time

The public debt of the eurozone for the first time in history will exceed 100% of the GDP of the countries included in it, the European Commission (EC) announced in the autumn economic forecast. Over the year, the debt will grow by 15%.

The total public debt will increase from 85.9% in 2019 to 101.7% in 2020, the EC predicts. The following years, the debt will also grow: up to 102.3% in 2021 and 102.6% in 2022.

The increase in debt is associated with an increase in the euro area's aggregate government budget deficit, from 0.6% of GDP in 2019 to about 8.8% in 2020. In 2021, the budget deficit is projected at 6.4%, and in 2022 - 4.7%. The figures include a gradual abandonment of emergency support measures for the economy. “The current epidemiological situation means that our estimates over the forecast horizon are subject to a high degree of uncertainty and risks,” the report says.

According to the new forecast, the euro area economy will contract by 7.8% in 2020 before growing by 4.2% in 2021 and 3% in 2022. The EU economy will contract by 7.4% in 2020 before starting to recover at 4.1% in 2021 and 3% in 2022. “The volume of GDP in both the eurozone and the EU will not recover to pre-crisis levels by 2022,” the European Commission’s autumn forecast says.

Eurozone inflation is projected to average 0.3% in 2020 before rising to 1.1% in 2021 and 1.3% in 2022. For the EU, inflation is projected at 0.7% in 2020, 1.3% in 2021 and 1.5% in 2022.