HomeEuropean Economic Growth Rebounds Strongly in Spring

European Economic Growth Rebounds Strongly in Spring

Strong economic growth ahead for the European economies. The European Economic Forecast shows 4.3% growth in 2021 in the Euro area.

The European Commission released its European Economic Forecast report recently. It showed that the European economies are recovering from the COVID-19 pandemic as the vaccination rates increase and lockdowns are lifted.

In 2020, the Euro area economies contracted by 6.6% due to the COVID-19 pandemic and the subsequent national lockdowns that followed. This year, the economies are expected to rebound strongly, albeit not recover all the lost ground; only in 2022 it is expected that the economies will be back above the pre-pandemic level.

Details of the European Economic Forecast Report

The report is important for its economic growth forecast. The market participants scrutinize the report in search of positive or negative details, and this time the report has an optimistic tone.

The rebound in economic activity stalled in the first quarter of the year, due to sluggish vaccination campaigns across Europe. However, the second quarter and beyond look strong, with an annual growth rate of over 4%.

2022 looks to benefit from the Recovery and Resilience Facility (RRF) and the public investment programs that it triggers. As such, the labour markets throughout Europe are expected to improve, with the unemployment rate forecasted at 7.6% in 2021 and 7% in 2022.

Public debt is expected to peak in 2021 and decline thereafter. During the pandemic, the support for households and businesses has played a critical role in handling the devastating impact on the economy. As a result, public debt increased to record levels, but the budget deficit is forecast to decline to below 4% by 2022.

The Spanish economy was the hardest hit in 2020, contracting by more than 10%. However, it is expected to bounce back strongly, growing by 5.9% in 2021 and 6.8% in 2022, more than most of the European economies. The tourism sector had a negative impact on the Southern economies, but the rebound is expected to be equally strong.

All in all, the European economies are expected to grow by 4.2% on average this year, and to continue the ascending trend next year. The positive developments helped euro, the common currency, to gain strength, as it trades above 1.21 against the dollar.

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