The growth in euro zone economy will be faster for both this year and next than was previously estimated, said the European Commission on Wednesday even though there are growing concerns that there could be fresh restrictions because of the fast spreading Delta variant of the coronavirus.
The rate of inflation for the 19-nation currency bloc for the current year was also forecast to be higher than previously expected, according to the European Union’s executive arm, even though it forecast a slowdown in consumer prices in 2022.
Growth in the euro zone will be 4.8 per cent for 2020 – much faster than the previously expected rate of 4.3 per cent as was forecast in May this year, predicted the EU Commission.
The Commission said that the major driver for this upgraded forecast was the reopening of the national economies of the bloc during the second quarter which proved to be beneficial for the services sector. The reopening is also expected to boost the tourism within the EU. Initial expectations had also been exceeded by the economic activity in the first quarter for the EU, the Commission also said.
The expected rebound this year form the pandemic hit is also expected to continue well into next year as the Commission expects euro zone to grow by at least 4.5 per cent which was more than the 4.4 per cent forecast by it in May this year.
The upgrade was however was based on the assumption that countries within the euro zone will further ease pandemic induced restrictions during the second half of 2021, the Commission also warned. Hence the risks of the forecast also remained high even though they were now quite balanced, the Commission said.
The Commission stressed on further speeding up of vaccination campaign to bring down the threats posed to the rebound by the spread and emergence of variants of the coronavirus – in particular by the fast spreading and more transmissible Delta variant. The Commission said citing estimates from the EU disease prevention agency that the delta variant is expected to become the dominant strain of the coronavirus in Europe this summer.
“The spread of the Delta variant is a stark reminder that we have not yet emerged from the shadow of the pandemic,” said EU economics commissioner Paolo Gentiloni.
However Gentiloni was confident about the ability of Europe to be able to control the impact of the new variant even without having to impose fresh restrictions.
“I am not seeing now at the horizon new restrictions substantially coming all around Europe,” he told a news conference.
However the concern’s among economists about the Delta variant which has been touted to have potential to cause recurring waves of infections due to its high transmissibility contrasted the optimism of Gentiloni.
“Even if hospitalization is lower these waves could have a more persistent impact on spending patterns especially in those economies where vaccination rates are too low or are stalling,” said George Saravelos of Deutsche Bank.
(Adapted from TheBusinessTimes.com)