[ad_1]
The European Commission has drastically raised its economic forecasts for the next two years, as an accelerated vaccination campaign helps the eurozone recover from the historic pandemic blow.
The euro area will expand by 4.3% this year and 4.4% in 2022, Brussels said on Wednesday, compared with previous growth forecasts of 3.8% in the two years. As a result, all member states are now expected to regain their pre-crisis production levels by the end of next year, following a historic 6.6% drop in 2020.
The stronger prospects were driven by rising vaccination rates and the prospect of blockages being relaxed throughout the region, as well as by improving export demand driven by a global upturn. Brussels, for the first time, took into account the impact of the next generation EU of 800 billion euros economic relaunch package, which is expected to start paying in the second half of the year.
“The shadow of Covid-19 is starting to drift away from the European economy,” said Paolo Gentiloni, EU economy commissioner. “After a weak start to the year, we project strong growth in both 2021 and 2022. Unprecedented tax support has been – and continues to be – essential to help European workers and businesses weather the storm.”
Europe fell into a double-dip recession earlier this year amid renewed blockades and a shaky start to the vaccination effort. However, evidence has recently been growing that the economy has “increased in speed,” according to the commission, which cited the best sentiment polls on businesses and consumers.
An additional easing of containment measures combined with advance payments from the recovery fund should accelerate savings in the third quarter, including those with large tourism sectors, which should benefit from a return to the “near normalcy of social activities during the summer ”, according to the commission.
Stronger global growth, driven in part by U.S. stimulus packages and improved growth in China, will also help lift the EU’s export sector and contribute to the recovery. The EU’s largest economy is forecast to grow by 4.2% in 2021 and 4.4% in 2022, according to forecasts, also with an update on the outlook for February. The block unemployment rate will reach 7.6% this year before falling to 7% in 2021.
Spain, which was the most affected EU economy last year and lost more than a tenth of its production, will grow by 5.9% in 2021 and 6.8% in 2022, according to the new perspectives. Italy will have to expand 4.2% this year and 4.4% next.
Germany, which suffered a much smaller contraction in 2020, could grow by 3.4% in 2021 and 4.1% in 2022. France proposes to expand by 5.7% this year and 4.2% next year.
Next year’s outlook will be supported by higher levels of public investment as a share of gross domestic product in more than a decade. This will be driven in part by the next-generation EU package, which is set to start paying in the summer once the commission signs its recovery plans to member states.
In total, the six-year program would have to pay about 140 billion euros in grants over the two years covered by the commission’s forecasts. According to the outlook, this would mean a 1.2% increase in GDP.
However, the crisis will continue to put massive pressure on public finances, with the global deficit in the eurozone rising to 8% of GDP this year. It is expected to be halved next year to 4%, but the legacy of the government’s extensive spending programs will still grow. The overall public debt-to-GDP ratio for the euro area will remain above 100% this year and next, the commission said.
EU member states face a you have a debate later this year on how to quickly curb their stimulus programs and whether you want to reform the bloc’s tax rules, which will remain suspended until 2023.
Among the risks to the outlook, the commission said, was the possibility that governments would decide to start revaluing their economic support packages too soon, undermining the recovery. Continuity of vaccine efficacy and the evolution of the pandemic will also play a key role in determining whether the updated EU forecast is justified.
[ad_2]
Source link
