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In the best-case scenario from the EU Commission, that 70 percent of European adults will be vaccinated in the summer, there is a “light at the end of the tunnel” for the pandemic-damaged European economy.
In his interim winter economic forecasts, the EU executive expects growth in the 19 eurozone countries to reach 3.8 percent this year and next after a 6.3 percent drop in 2020.
Growth across the EU is forecast to be 3.7 percent in 2021 and 3.9 percent next year, recovering from a 6.3 percent decline in 2020.
What allows the commission to be a little more optimistic than when it published its last forecast in the fall is the launch of the vaccine and a little more clarity on the impact of Covid-19 on the economy.
“We remain in the painful clutches of the pandemic, its social and economic consequences are all too obvious. However, finally, there is light at the end of the tunnel,” Economy Commissioner Paolo Gentiloni told reporters on Thursday (February 11) .
“Compared to the fall, we face fewer unknown risks and more known risks,” he added.
Gentiloni acknowledged that the goal of vaccinating 70 percent of European adults by summer was “a challenging goal.”
There was a strong rebound in the third quarter of last year, which was then stopped by the second wave of the pandemic.
Economic growth is now expected to resume in the spring and gain momentum in the summer thanks to the vaccination program, which would ease the lockdown measures, according to the commission’s expectations.
However, delays in vaccination by member states could slow down the recovery.
The commission also warned countries that “a premature withdrawal” of fiscal and monetary measures to support economies would risk recovery.
The commission said there is also a risk that the crisis will leave deeper social and economic scars, through widespread bankruptcies and job losses.
This could increase long-term unemployment and worsen inequalities, including gender inequality, and damage financial markets.
Mid-2022 recovery
The commission expects the bloc’s economy to return to pre-pandemic GDP levels in mid-2022, earlier than expected. The commission previously projected that the recovery would not be complete until 2023.
But the recovery will not be uniform across the block and could also be affected if new variants of Covid-19 emerge.
The commission’s estimates do not take into account the full effect of the € 750 billion recovery fund, because the programs it will fund have not yet translated into budgetary measures everywhere.
The fund is not expected to start distributing money before the summer, as member states have yet to ratify legislation allowing the commission to raise money in the markets for the fund.
So far Croatia, Cyprus, Slovenia, Portugal, France and Bulgaria have ratified it.
Brexit loss
However, the forecast is the first to take into account the effects of the Brexit trade deal on the EU economy.
For the EU, on average, the UK’s exit from the EU under the terms of the trade agreement reached last December means a production loss of around 0.5 percent of GDP by the end of 2022 and 2.2 percent. cent for the UK.
