Winter 2021 Economic Forecast: A challenging winter, but light at the end of the tunnel
- 3 years ago
Europe remains in the grip of the coronavirus pandemic. The resurgence in the number of cases, together with the appearance of new, more contagious strains of the coronavirus, have forced many Member States to reintroduce or tighten containment measures. https://www.eudebates.tv/debates/eu-policies/economy/eu-taxation-tries-to-follow-digital-and-globalised-economy/ #eudebates #NextGenerationEU #MFF #EUbudget At the same time, the start of vaccination programmes throughout the EU provides grounds for cautious optimism.
First, the economic situation this winter remains challenging. Since the autumn, many Member States have reintroduced or tightened containment measures in response to the resurgence in infections and, more recently, to the spread of new, more contagious variants of the coronavirus. To be clear, these measures are necessary. But of course affect economic activity – although to a much lesser degree than in Spring last year.
Second, because the recession in 2020 was not as deep as expected, and thanks to the breakthroughs regarding vaccines, we now project the EU economy will return to its pre-crisis GDP level already in 2022.
This forecast assumes that the current strict containment measures will ease towards the end of the second quarter this year and then more markedly in the second half of the year, when the most vulnerable and an increasing share of the adult population should have been vaccinated. Containment measures are then assumed to be marginal towards the end of 2021, with only targeted sectoral measures still present in 2022.
Overall, EU GDP is now forecast to grow by about 3.7% this year and 3.9% in 2022 after a contraction estimated at 6.3% last year. In a few words compared to our Autumn Forecast: a smaller contraction in 2020, lower growth in 2021 and stronger growth in 2022.
Third, the recovery is set to be uneven across Member States. This mainly reflects differences in the structure of each economy and the relative importance of tourism and leisure activities.
Fourth, uncertainty and risks to the assumptions I have just mentioned remain very high, as all forecasts are at this time. They are linked in particular to the evolution of the pandemic, including the emergence of new variants and the success of vaccination campaigns.
And fifth, this forecast does not take into account the potentially very significant positive impact of NextGenerationEU, because we lack sufficient data for this as I will explain.
The pandemic has tightened its grip on Europe since autumn. The rate of infection has seen an acceleration in many countries, followed by a new surge in hospitalisations and deaths.
More recently, new, more infectious variants of the virus have also started to spread in some countries. National authorities have rightly decided to tighten restrictions, as illustrated by the Oxford Stringency Index and the declining Google mobility index.
First, the economic situation this winter remains challenging. Since the autumn, many Member States have reintroduced or tightened containment measures in response to the resurgence in infections and, more recently, to the spread of new, more contagious variants of the coronavirus. To be clear, these measures are necessary. But of course affect economic activity – although to a much lesser degree than in Spring last year.
Second, because the recession in 2020 was not as deep as expected, and thanks to the breakthroughs regarding vaccines, we now project the EU economy will return to its pre-crisis GDP level already in 2022.
This forecast assumes that the current strict containment measures will ease towards the end of the second quarter this year and then more markedly in the second half of the year, when the most vulnerable and an increasing share of the adult population should have been vaccinated. Containment measures are then assumed to be marginal towards the end of 2021, with only targeted sectoral measures still present in 2022.
Overall, EU GDP is now forecast to grow by about 3.7% this year and 3.9% in 2022 after a contraction estimated at 6.3% last year. In a few words compared to our Autumn Forecast: a smaller contraction in 2020, lower growth in 2021 and stronger growth in 2022.
Third, the recovery is set to be uneven across Member States. This mainly reflects differences in the structure of each economy and the relative importance of tourism and leisure activities.
Fourth, uncertainty and risks to the assumptions I have just mentioned remain very high, as all forecasts are at this time. They are linked in particular to the evolution of the pandemic, including the emergence of new variants and the success of vaccination campaigns.
And fifth, this forecast does not take into account the potentially very significant positive impact of NextGenerationEU, because we lack sufficient data for this as I will explain.
The pandemic has tightened its grip on Europe since autumn. The rate of infection has seen an acceleration in many countries, followed by a new surge in hospitalisations and deaths.
More recently, new, more infectious variants of the virus have also started to spread in some countries. National authorities have rightly decided to tighten restrictions, as illustrated by the Oxford Stringency Index and the declining Google mobility index.