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Europe’s Economy could Return to Pre-Crisis Levels next Year

Europe’s economy is on track to return to its pre-crisis levels in 2022, the International Monetary Fund said on Wednesday, though this projection depends on the region’s Covid-19 vaccination campaign. European countries have been forced to introduce new restrictions or toughen previous public health measures in recent weeks as Covid infections have surged. This led to a 0.2 percentage point drop in the IMF’s growth forecast for this year, which currently stands at 4.5%.

Europe’s Pandemic-Stricken Economy could Return to Pre-Crisis Levels next Year, IMF Says

“On the assumption that vaccines become widely available in the summer of 2021 and throughout 2022, GDP growth is projected at 3.9% in 2022, bringing Europe’s GDP back to the pre-pandemic levels,” the IMF said in its latest regional economic outlook. However, uncertainty over how the pandemic will evolve continues to cloud the outlook, particularly when it comes to potential new variants and the speed of the vaccination rollout.

In fact, the 27 members of the European Union received some further bad news this week, after Johnson & Johnson said it would delay the rollout of its vaccine in Europe after authorities in the U.S. raised concerns about extremely rare blood clot complications. This is not the first delay to vaccine distribution in Europe and the EU has faced sharp criticism over the pace of its rollout to date. In addition to issues with the Oxford-AstraZeneca vaccine, Europe’s drug regulator has been blamed for taking too long to approve new vaccines, to name one of the recent problems.

The IMF said it expected to see high prices in the continent throughout 2021. “Inflation, currently contained by economic slack, is projected to edge up by 1.1 percentage points to 3.1% in 2021, partly due to higher commodity prices,” the Fund said in its report. Surging inflation could force the ECB to adjust its ultra-loose monetary stance. Rising real yields are also a concern for the ECB. The main worry is that if borrowing costs rise for euro governments before the economy has really turned the page on the crisis, this could jeopardize the entire recovery.

Source: FXPro

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