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Economy

EU Sees Initially Gradual and Then Faster Economic Recovery in Greece

February 11, 2021

ATHENS –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.

Greece is expected to have an initially gradual and then accelerating recovery in 2021 and 2022, Paolo Gentiloni, European Commissioner for Economic Affairs, said on Thursday.

Speaking to reporters during a press conference for the presentation of the Commission's winter economic forecasts, Gentiloni said: "We know that Greece suffered a serious contraction in 2020, along with other countries where certain sectors are particularly strong. In the case of Greece, both tourism and the travel industry are very strong sectors."

The Commissioner said the Commission's forecasts see a gradual and then a faster recovery in 2021 and 2022, adding that the 9th enhanced surveillance report on Greece will soon be discussed and his belief that Greek authorities are fully committed to dealing with this crisis to avoid any repercussions on the social level.

Gentiloni said that economic recovery will be uneven among member-states and noted that the winter estimates did not include the possibly very significant positive impact of the NextGenerationEU.

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.

Gentiloni also 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.”

 

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