Almaty. May 13. KazTAG - The economy of the EU will bounce back more quickly than expected, owing in part to the quickening pace of its vaccination programme after a “slow start”, the European Commission has forecast, reports the Guardian.
The brighter outlook from Brussels also takes into account payouts from the EU’s €800bn (£686bn) recovery package and a sharper than predicted rebound in global trade and activity, largely driven by the performances of the US and China.
The commission forecast the EU’s GDP would grow by 4.2% in 2021 and by 4.4% in 2022, compared with a prediction in February of 3.7% and 3.9%. The eurozone’s GDP is forecast to grow by 4.3% and 4.4%, respectively.
Paolo Gentiloni, the EU’s economics commissioner and former prime minister of Italy, said: “The faster pace of vaccinations in recent months should allow restrictions to be eased further in the second half of the year, and in fact this is already happening, and thereby allow the economy to bounce back.”
Europe plunged into a double-dip recession early this year but the easing of Covid-19 restrictions and huge public investment programmes facilitated by payouts from the next generation EU package are expected to fuel a sharp recovery.
Of the biggest European economies, Germany’s GDP contracted by 1.7% in the first quarter of 2021 – compared with 1.5% in the UK over the same period – but it is expected to recover to pre-crisis levels towards the end of this year. Growth is projected at 3.4% in 2021 and 4.1% in 2022.
Economic activity in France is expected to rebound by 5.7% this year and grow by 4.2% next year, while GDP in Spain, the European economy hardest hit, is expected to grow by 5.9% in 2021 and 6.8% in 2022. Both countries are forecast to reach pre-pandemic levels of output by the end of 2022.
By comparison, the commission expects UK GDP to rise by 5% in 2021 and by 5.3% in 2022, noting that “the rollout of vaccinations has progressed rather quickly”. The latest forecasts published by the Bank of England last week suggest economic growth in the UK will reach 7.25% in 2021 and 5.75% in 2022.
The commission expects the UK to hit pre-pandemic levels by the third quarter of 2022, while the Bank of England believes the UK will be back at early 2020 levels by the end of this year. The economy suffered a 9.8% fall in GDP in 2020, the second biggest drop in Europe after Spain.
The forecast adds that the “UK’s departure from the EU is expected to weigh on trade and growth”.
“This became evident in early 2021 when UK trade volumes with the EU fell sharply,” the commission’s forecast says. “While some of these disruptions will be temporary, as businesses get used to the new rules, UK trade is expected to remain permanently lower over the forecast period as compared to a situation with unchanged EU-UK trading relations.”
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