Gross domestic product (GDP) contractions in the first quarter of this year turned out to be modest, more modest than suggested by Eurostat’s provisional flash estimates.
Bright findings between consumers and businesses, as well as data-tracking mobility, suggest that consumption recovery is already underway and is set to be strengthened in the coming months.
There is also evidence that tourism has begun to revive, which should also benefit from the new EU Digital COVID Certificate. Together, these factors are expected to outweigh the temporary shortage of production inputs and rising costs that will hit some parts of the manufacturing sector.
Overall, GDP is currently projected to grow 4.8% in 2021 and 4.5% in 2022 in both the EU and Euro regions. Production is projected to return to pre-crisis levels (2019-Q4) in the last quarter of 2021. This is a quarter earlier than the eurozone spring forecast.
However, based on the extrapolation of the winter 2020 interim forecast, economic activity in the fourth quarter of 2022 remains about 1% shy than was expected before the pandemic. The rate of recovery varies significantly from EU member state to EU member state. Some are expected to return to pre-pandemic levels of economic output by the third quarter of 2021, while others will take longer.
Inflation expectations for this year and next year have also been revised upwards, maintaining a hump-like profile. Rising energy and commodity prices, production bottlenecks due to a shortage of some input parts and raw materials, and capacity constraints on fast-growing domestic and international demand are expected to put upward pressure on consumer prices this year. Will be done.
By 2022, pressure is expected to gradually ease as supply constraints are lifted, backlogs are lifted and demand growth slows. Therefore, EU inflation is projected to average 2.2% this year and 1.6% in 2022. In the euro area, inflation is projected to average 1.9% in 2021 and 1.4% in 2022.
The uncertainties and risks surrounding the growth outlook are high, but overall balanced. The threat posed by the spread and emergence of the variant of concern underscores the importance of increasing complete vaccination even more rapidly. Economic risks are particularly related to the impact of households and businesses responding to regulatory changes and the withdrawal of emergency policy support.
Fiber2Fashion News Desk (DS)
The EU economy is starting to move again with improved health and subsequent continued relaxation of virus containment measures. The short-term outlook for the European economy looks brighter than expected in the spring. The reduction in GDP in the first quarter of 2021 turned out to be modest, more modest than suggested by Eurostat’s provisional flash estimates.
The short-term outlook for the EU economy looks brighter than expected in the spring
Source link The short-term outlook for the EU economy looks brighter than expected in the spring