The European Commission expects a return to pre-pandemic economic output levels by the end of the year amid confidence that Covid-19 vaccines will stave off a fresh mass wave of infections despite the spread of the Delta virus variant.
The European Union and the eurozone economy are set to grow by 4.8 per cent this year and 4.5 per cent in 2022, the EU executive said in its latest economic forecast on Wednesday. This is much faster than foreseen in its last prediction.
Real gross domestic product (GDP) is therefore projected to recover to pre-crisis levels in the final three months of the year – also quicker than previously anticipated, according to the model.
The improved forecast is due to three factors, the commission said: stronger-than-expected economic activity in the first months of the year; effective coronavirus containment plus vaccinations allowing a reopening of the economy; and tourism within the European Union.
“Vaccination campaigns continue to progress at a fast pace across the European Union,” European Commissioner for Economy Paolo Gentiloni said, noting than more than 60 per cent of EU adults had by now had at least one shot.
But virus-related risks remain, the commissioner stressed, underlining the need to redouble inoculation efforts.
“The spread of the Delta variant is a stark reminder that we have not yet emerged from the shadow of the pandemic,” Gentiloni warned. “The message is vaccination, vaccination, vaccination.”
While infection numbers had been falling since April across the bloc, some member states were seeing a fresh spike, the senior EU official said.
Asked if he thought restrictions on personal movement might have to be reimposed, Gentiloni said he hoped this would not be the case since the four EU-approved vaccines were so far known to be highly effective against variants.
“We can see exceptions but we don’t see a tendency towards new restrictions,” he told journalists in Brussels. “Of course, nobody has any certainty.”
With many of the EU’s major trading partners, like the United States and Britain, seeing similar growth trends, the commission expects exports in EU goods to be buoyant. Service exports, however, should remain stymied by continued restrictions on international tourism.
While the growing confidence may be welcome news for many EU businesses and citizens, the strong headline GDP figures mask significant divergence among the member 27 member states.
“The speed of the recovery is set to vary,” Gentiloni said. Not all member states had sustained the same economic or public health hit last year, he noted.
Poland is expected to have returned to pre-crisis levels already by the middle of this year at the latest, Germany and the Netherlands by October at the latest, while Spain and Italy should only do so in the third quarter of next year.
Spain and Italy were among the worst hit by the virus’ first wave, and their tourism-orientated economies saw two of the severest dips in 2020.
The rate of inflation is expected to average 1.9 per cent for the 19 countries that use the euro in 2021, and 2.2 per cent across the entire 27-member bloc. Next year, this rate should be 1.4 per cent and 1.6 per cent respectively.
