The euro area economy is forecast to recover at a slower-than-expected pace this year, as the resurgence of the Covid-19 infections, together with more contagious variants of the virus forced many economies to tighten containment measures, the European Commission said in its interim Winter forecast, released Thursday.
The currency bloc is expected to grow 3.8 percent this year, instead of 4.2 percent projected in the autumn forecast. However, the outlook for 2022 was lifted to 3.8 percent from 3 percent citing the start of mass vaccination campaigns.
“Today’s forecast provides real hope at a time of great uncertainty for us all,” Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People said. “The solid expected pick-up of growth in the second half of this year shows very clearly that we are turning the corner in overcoming this crisis.”
The EU cautioned that projections are subject to significant uncertainty and elevated risks, predominately linked to the evolution of the pandemic and the success of vaccination campaigns.
The economic impact of the pandemic remains uneven across member states and the speed of the recovery was also projected to vary significantly.
Germany’s real GDP is forecast to rebound by 3.2 percent in 2021, returning to its pre-crisis level at the turn of the year. In 2022, the economy should continue growing by 3.1 percent, the EU said.
France’s real GDP is projected to expand by 5.5 percent in 2021 and by 4.4 percent in 2022.
Italy’s GDP is projected to expand by 3.4 percent in 2021. Real output is set to grow at almost similar pace in 2022 on the back of the momentum gained in the second half of this year on the back of continued recovery of the services sector.
Spain‘s GDP is forecast to grow by 5.6 percent in 2021. In 2022, driven by the tourism recovery, the region is set to expand 5.3 percent.
The European Union is forecast to rebound 3.7 percent this year, before advancing 3.9 percent in 2022.
Inflation in the euro area is expected to be slightly higher in 2021 compared to last autumn, but to remain subdued despite a temporary boost from base effects, EU said.
Inflation is seen at 1.4 percent in 2021, up from the prior forecast of 1.1 percent. As supply side adjusts and base effects taper out, inflation is projected to moderate to 1.3 percent in 2022, which was unchanged from the prior forecast.
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