section_path: Overall economic contraction
section_name: Overall economic contraction
paragraph_text: Overall economic contraction
  
  In 2020 global stock markets experienced their worst crash since 1987, and in the first three months of 2020 the G20 economies fell 3.4% year-on-year. Between April and June 2020, the International Labour Organization estimated that an equivalent of 400 million full-time jobs were lost across the world, and income earned by workers globally fell 10 percent in the first nine months of 2020, equivalent to a loss of over US$3.5 trillion. Cambridge University put the cost to the global economy at $82 trillion over five years. When the COVID-19 pandemic hit Europe, much of Europe's investment had been high, but it had unexpectedly slowed. In 2019, overall investment in the European Union increased by about 3% over the previous year, surpassing growth in real GDP.
  
  Investment, like other economic activity, fell drastically as a direct result of lockdown restrictions. This effect was particularly noticeable in the second quarter of 2020, when investment decreased 19% year on year, as most limitations were relaxed by the summer. In 2019, firms already had an unfavorable assessment of the economic situation. Overall expectations for sector-specific business prospects, as well as the availability of internal and external funding, deteriorated in the course of 2020. In the European Investment Bank Investment report 2020–21, 81% of the respondents cited uncertainty as the most severe obstacle to investment. 20% of EU companies anticipate a permanent loss in employment, indicating that a sizable proportion of firms are pessimistic about their capacity to "bounce back" once the COVID-19 crisis has passed.
  
  As a result of the pandemic, half of European companies anticipate an increase in the usage of digital technologies in the future. The proportion is considerably greater among companies that have previously used digital technology.
  
  The European Union's public debt is expected to exceed 95% of GDP by the end of 2021, a 15 percentage point rise since the pandemic began in 2019.
  
  From the first to the second quarter of 2020, the EU government debt grew by 8.4 percentage points to 88% of GDP. According to the European Commission, debt to GDP reached 94% by the end of 2020. In autumn 2020, a second wave of infection and lockdowns aggravated the problem.
  
  After one year of the COVID-19 crisis, corporate investment was expected to decline by at least 25%.
  
  The International Monetary Fund (IMF) and other organizations predicted that the European Union's GDP would contract by 6% to 8%, a drop unprecedented since the Great Depression.
  
  The European Union's total real GDP fall was more than 11% compared to the first quarter of 2020, the biggest drop in a single quarter on record.
  
  The reduction in GDP was caused by government attempts to restrict the virus's spread, and it varied greatly between Member States. It was weakest, on average, in Central and Eastern Europe, where real GDP decreased 9.7% in the second quarter compared to the first. It decreased by 11.5% in Western and Northern Europe, and by roughly 15% in Southern Europe. In comparison, real GDP in the United States fell by nearly 9% in the second quarter compared to the first quarter.
  
  In the second quarter of 2020, disposable income per capita decreased dramatically, affecting consumer expenditure, particularly for lower-income families.
  
  The impact of the COVID-19 varied greatly on the industry. Sectors that rely heavily on physical presence, including passenger transportation, the arts, entertainment, tourism, and hospitality, were impacted the worst, with declines of up to 30% in the second quarter of 2020 compared to the first quarter. Industries such as agriculture, banking, and real estate, declined by 3% or less during the same time span. During the 2008 financial crisis, the distribution of economic effect across sectors was extremely varied, with EU manufacturing suffering the worst decrease – over 20% in the first quarter of 2009. The decrease in other sectors was relatively limited, at around or below 6%.
  
  GDP per hour in the EU grew by 0.3 percent in the second quarter of 2020 compared to the same time in 2019, while GDP per employee decreased 11.5%. Access to capital is seen as a barrier by about 55% of businesses. Credit limitations are especially difficult for SMEs and new businesses to overcome. Credit constraints affect 24% of SMEs and 27% of young businesses.
  
  More than two-fifths of businesses (44%) did not experience a year-on-year sales loss as a result of COVID-19 at the time of the European Investment Bank 's investment survey, and more than half predicted stronger sales in 2022 than before the pandemic.
  
  In Western and Northern Europe, as well as Central and Eastern Europe, the unemployment rate climbed by roughly 0.5 percentage point. The rise was greater in Southern Europe (1.5 percentage points). The United States increased by 4 percentage points during the same period, reaching a high of 10 percentage points in April in 2021.
  
  44% of enterprises in Central, Eastern and Southeastern European countries incurred losses in 2020 and/or 2021, and 10% did not anticipate to recover from pandemic-era economic losses in 2022. 60% of CESEE enterprises received some type of financial assistance in response to COVID-19, which is the same as the EU average. This was largely in the form of subsidies or other types of non-repayable financial assistance. Only around one out of every ten businesses reports that they are still receiving financial assistance in 2023.
  
  All sectors received support during the COVID-19 crisis, primarily through subsidies. In 2022, energy-intensive Industries had the highest share of firms (22%) still receiving support. Energy-intensive industries and renewables saw the strongest recovery post-pandemic, with sales increased by 76% and 72%, from 2020 to 2021. Other sectors in the EU also experienced significant turnover growth post-COVID-19.
  
  In Europe, the hardest hit sector by the COVID-19 pandemic was electronics, due to semiconductor shortages. The construction sector was most directly impacted by the Russian invasion of Ukraine rather than the pandemic. The digital sector was overall least affected by trade disruptions from COVID-19.