BRUSSELS – Despite deep uncertainty over a surge in coronavirus cases and the impact of new variants of the disease, senior European Commission officials on Thursday expressed cautious optimism that European economies will rebound later this year and in 2022.
In its winter interim economic forecasts, the European Union’s executive body predicts that growth in the 19 nations using the euro will reach 3.8% this year and next after a 6.8% drop in 2020.
Growth in the wider 27-nation EU is predicted to hit 3.7% this year and 3.9% in 2022 following last year's 6.3% slide.
The forecasts hinge on the assumption that coronavirus restrictions will remain tight for most of the first half of this year but ease in late Spring, when most vulnerable people around Europe like the elderly and those with other illnesses are expected to have been vaccinated.
Economy Commissioner Paolo Gentiloni said that “there is, at last, light at the end of the tunnel.”
Commission Vice-President Valdis Dombrovskis said the prediction “provides real hope at a time of great uncertainty for us all. 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.”
But Dombrovskis warned that “a strong European response will be crucial to tackle issues such as job losses, a weakened corporate sector and rising inequalities. We will still have a great deal to do to contain the wider socio-economic fallout.”
Gentiloni conceded though that the virus is posing major economic and social challenges. “None of the member states is expected return in 2022 to the growth path projected before the crisis. In 2022, GDP in the EU and the euro-area will remain about 4% below what pre-pandemic forecasts had projected,” he said.
He also noted that much would depend on the way the coronavirus is handled. If restrictions are prolonged, the risk posed by new variants rises and confidence is subdued, "growth in 2021 would remain limited to 2%.” But if vaccines are distributed earlier than expected and halt the spread of COVID-19 then growth might increase by a further 1% of GDP.
Despite the slightly upbeat nature of the new forecasts, the eurozone countries are predicted to lag China and the U.S. in bouncing back from the worst of the pandemic.
A winter wave of coronavirus infections around Europe has meant new restrictions on travel and business activity, although companies in some sectors such as manufacturing have been better able to adjust than services businesses like hotels and restaurants.
On the impact of Britain's departure from the EU with a limited trade agreement, Gentiloni noted that it “implies an output loss of around 0.5 percentage points of GDP until the end of 2022 for the EU, and some 2.2 percentage point loss for the U.K. in the same period.”