Regional GDP rebounded after a deep pandemic-induced recession
Regional GDP has strongly recovered in 2021 after a massive downturn in 2020. The COVID-19 pandemic outbreak had a severe impact on the European economy and society as a whole. The regional impact of the crisis in 2020 was also overwhelmingly and strongly negative. Regional GDP fell in all but three European regions. The unprecedented, bold and coordinated economic policy actions taken arguably contributed in effectively mitigating the social and economic impact of the pandemic. In aggregate terms, GDP at the EU level exceeded the pre-pandemic quarterly levels already by the last quarter of 2021, whereas it took seven years to exceed the pre-crisis level in the wake of the 2008 crisis. The regional data also point to a broad-based recovery in 2021, as well as to a stronger rebound in GDP growth compared to the global financial crisis. Although regional economic data for 2022 are not yet available, the EU economy has continued to grow at an annual rate of 3.5% in 2022 - a year characterized by severe geopolitical and inflationary pressures - but is expected to significantly slowdown to 1% in 2023 according to the latest Spring Economic Forecasts (European Commission, 2023).
Figure 1 - Regional GDP growth in 2020 and 2021
TIPS: Click on the "i" in the top right of the 2021 map for tips on how to zoom and find the Outermost Regions.
A tale of two crises: what effects on cohesion?
It is too early to be able to thoroughly assess the longer term impact of the COVID-19 outbreak on cohesion, but less developed regions have recovered faster than in the past (Figure 4 and 5).
The available data confirm that the shock was deep and negative in 2020. Overall, the GDP fall was even deeper than during the great recession of 2009. As highlighted in the 8th Cohesion Report (European Commission, 2022), some regions felt it more than others and – within them – some workers and sectors more than others (e.g. tourism, cultural activities, industries affected by supply chains disruptions, etc.). However, the ensuing economic recovery was relatively more broad-based and faster than in 2010 (Figure 2-5). About one quarter of the EU’s regions still experienced a negative growth rate in 2010 (e.g. the year after the recession, Figure 2), whereas only 4 regions did so in 2021 (Figure 3). One could even see a slightly negative correlation between regional growth rates in 2020 and 2021, meaning that regions experiencing a deeper drop in GDP in 2020 were, on average, also the ones that experienced a more solid rebound in 2021 (Figure 3). This was not the case after the global financial crisis. In that case it was mostly less developed and transition regions that ‘remained behind’ (Figure 4). This has not happened this time (Figure 5). On the other hand, there is again a very large heterogeneity in growth rates across regions and within countries even in 2021, as can be seen on the scatter plots of regional GDP growth (Figure 2 and 3).
Figure 2 - Real GDP growth rate in 2009 and 2010, by NUTS2 region
Figure 3 - Real GDP growth rate in 2020 and 2021, by NUTS2 region
Figure 4- Real GDP by categories of regions in 2008, 2009 and 2010
2008 GDP = 100
Figure 5- Real GDP by categories of regions in 2019, 2020 and 2021
2019 GDP = 100
Labour market performance
The positive performance in labour markets continued in 2021-22.
Thanks to job-retention schemes and other policy initiatives, the negative impact of the pandemic outbreak on employment and unemployment was much smaller than the one on GDP (Giupponi, G. et al., 2022). These policy actions allowed the EU to avoid a big spike in unemployment, a major difference with the US experience (Figure 6). Employment rates also declined only marginally and returned around the pre-pandemic levels by the end of 2021 (Figure 7). Urban and rural areas fared similarly in this regard but the increase in the number of people working from home was generally higher in capital regions or regions with a more developed service economy hosting jobs that can more easily be done remotely. With the swift economic recovery in 2021, by the end of the year labour shortages reached or even exceeded pre-pandemic levels in several EU countries (European Commission, 2022).
Figure 6 - Monthly unemployment rate in the EU and the US (seasonally adjusted)
Figure 7 - Quarterly employment rate by degree of urbanisation in the EU
Regional GDP growth beyond 2021
It is too early to assess the regional impact of the war in Ukraine and high commodity prices in 2022 due to lack of regional data.
In a context of relatively strong economic rebound seen in 2021, the war in Ukraine has put at risk the then fragile economic recovery, causing a humanitarian crisis in Europe, contributing to increasing food and commodity prices globally and exacerbating the social and distributional consequences of pre-existing inflationary pressures partly related to supply chains disruptions. It is too early to assess the regional dimension of these shocks due to lack of regional statistics. On the one hand, economic activity in the EU continued to grow in 2022 at a rate of 3.5% and the European Commission's 2023 Spring Economic Forecasts have been recently revised upwards to 1% in 2023 and 1.7% in 2024 (European Commission, 2023), suggesting that a mildly supportive macroeconomic context may help also to alleviate increased social needs and continue to support a broad-based recovery. On the other hand, the current equilibrium remains fragile and volatile, implying non-negligible risks and uncertainties for the economic outlook.
All data shown on maps and charts: DG Regional and Urban Policy, based on Eurostat data (regional accounts and Labour Force Survey) - Data available in April 2023.
The full 8th Cohesion report and supporting materials is available on this link. For data stories linked to the 8th Cohesion Report: Regional COVID-19 impact - Regional innovation gaps - Regional demographic trends
Author: Pasquale D'APICE
IT and Statistics: Hugo POELMAN, Roselinda ACKERMANS
Text: June 2023