The European Commission has revised its economic outlook for the next two years upwards based on its accelerated vaccination program, a recovery fund that is due to take effect, and stronger global targets at the expense of China and the US.
The 2021 Spring Economic Forecast, released Wednesday, predicts that the economy of the 27-member European Union will grow 4.2 percent in 2021 and 4.4 percent in 2022, while the economy of the eurozone, made up of of 19 members, will grow by 4.3 percent this year and 4.4 percent. percent next year. The figures for this year were higher than the February forecast of 3.7 percent for the EU economy and 3.8 percent for the eurozone economy.
The Eurozone is a subset of the EU countries that use the Euro as their national currency.
The Commission said growth rates will continue to vary across the EU, but all member states should see their economies return to pre-crisis levels by the end of 2022. In 2020, the EU economy contracted by 6.1 percent and the eurozone economy by 6.6 percent. , a failure described by the European Commission as a “shock of historic proportions”.
“Although we have not yet emerged from the forest, the economic outlook for Europe looks much better,” said Valdis Dombrovskis, Executive Vice President of the European Commission.
He said that raising vaccination rates, easing restrictions, getting people back to normal, and the EU’s recovery program have all contributed to better projections. But he warned that there is still a lot of hard work ahead.
European Economic Commissioner Paolo Gentiloni said: “The shadow of COVID-19 is starting to fade from the European economy.”
He named a stronger-than-expected recovery in global activity and trade as one of the main factors behind the improved outlook. China replaced the US this year and became the EU’s largest trading partner for the first time.
“In China, growth is expected to continue at a rapid pace, fueled by its early control over the pandemic and strong external demand,” Gentiloni said.
The EU economic recovery that began last summer stalled in the fourth quarter of 2020 and the first quarter of this year as new public health measures were introduced to contain the surge in COVID-19 cases.
The Commission said the recovery in growth will also be driven by private consumption and investment. Public investment as a percentage of GDP is set to reach its highest level in more than a decade in 2022, supported by the EU’s € 750 billion ($ 905 billion) recovery plan.
The Commission predicted that the EU unemployment rate will be 7.6 percent in 2021 and 7 percent in 2022, while the euro area unemployment rate will remain at 8.4 percent in 2021 and 7.8 percent in 2022.
Hosuk Lee-Makiyama, an economist and director of the European Center for International Political Economy in Brussels, said the spring forecast is very much in line with the IMF’s April forecast.
“It is clear that the eurozone has not yet got out of the woods,” he said. “European companies will continue to look for growth opportunities in China and other markets.”
Ding Chun, director of the Center for European Studies at Shanghai Fudan University, said the EU’s economic growth over the next two years will largely depend on controlling the pandemic and implementing appropriate EU economic measures.
“High public debt and large economic recovery gap between member countries will negatively affect related policies and their implementation,” Dean said.
The spring forecast also projected that the bloc’s largest economy, Germany, would grow 3.4 percent in 2021 and 4.1 percent in 2022.
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