Here is what you need to know.
What is GDP?
GDP, or gross domestic product, is one of the main indicators of an economy’s health and represents the total value of what the country produced in goods and services during a specific period of time.
As such it includes all private and public consumption, government spending, investments, construction work and the foreign balance of trade — whether a country has exported more than it has imported.
This makes it a particularly useful indicator and when it is growing, especially if inflation is not a problem, it is usually a good thing for workers and businesses.
But it has limitations and does not capture a complete snapshot of the economy. For instance, all unpaid work is omitted such as if one person cares for an elderly. It also doesn’t reveal how the income is split across the population.
European Union suffers record decline
The European Union’s GDP decreased by 3.5 per cent in the first quarter of this year, according to a preliminary flash released by Eurostat, the bloc’s official statistics agency, on Thursday.
The drop was even more acute for the eurozone — comprised of 19 member states — with GDP expected to have contracted by 3.8 per cent quarter-on-quarter.
“These were the sharpest declines observed since time series started in 1995,” Eurostat said in a statement.
These were attributed to the COVID-19 containment measures.
France enters a recession
French GDP fell by 5.8 per cent in the first quarter, “the biggest drop” since 1949 the country’s INSEE statistics agency said on Thursday as it unveiled its first estimate.
It flagged for instance that the decrease is much sharper than the 1.6% contraction observed in the first quarter of 2009 when the financial crisis hit.
“GDP’s negative evolution in Q1 2020 is primarily linked to the shut-down of ‘non-essential’ activities in the context of the implementation of the lockdown since mid-March,” INSEE said.
This means that the country is now in recession, which happens when two consecutive quarters of sub-zero growth are recorded.
In the last three months of 2019, France’s GDP had slipped by -0.1%.
French authorities imposed a strict lockdown on March 17 to contain the spread of the pandemic. The first restrictions are due to be lifted on May 11, with Prime Minister Edouard Philippe stressing earlier this week that taking too long to ease containment measures could have catastrophic consequences on the economy.
As of Wednesday evening, more than 24,000 people had died in French hospitals and care homes.
Italy also in recession
Italy also entered into a recession in the first quarter with GDP decreasing by 4.7 per cent compared to the previous quarter, the ISTAT statistics agency announced on Thursday. If the estimate is confirmed, it would be the worst reading since 1995, when Eurostat began its monitoring.
It follows a contracting of 0.3 per cent in the last three months of 2019.
Italy was the first European country to imposed a lockdown and has so far been the worst-hit country mint he region, with more than 27,600 fatalities recorded.
Worst reading ever in Spain
The Spanish economy contracted by 5.2 per cent compared the previous quarter, the INE statistics agency said on Thursday.
This is the worst reading since records began in the 1970s.
“The situation caused by COVID-19 in Spain and the impact of measures taken to protect the health of the population since March have introduced an extraordinary difficulty to measure the economic evolution of the whole of the quarter,” INE flagged in a statement accompanying its flash estimate.
Spain is the third most impacted country in Europe behind Italy and the UK. More than 24,200 people are now to have died from the virus in the country.
US economy shrinks for the first time in six years
The US economy shrunk by 4.8 per cent in the first quarter of the year, according to the advance estimate by the Bureau of Economic Analysis (BEA).
It’s the country’s first contraction since 2014 and the biggest largest drop in over a decade.
“The decline in first-quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued ‘stay-at-home’ orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or cancelled operations, and consumers cancelled, restricted, or redirected their spending,” the BEA said.
It added that “the full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified”.