It seems that hope for an economic recovery in the Eurozone by the time of the new year has diminished again due to the recovery of the epidemic. The lockdowns at the end of 2020, which have continued so far this year and threaten to tighten as the rate of infections continue to rise, have already left the first signs of what experts call a double-dip recession. In fact, the European Central Bank (ECB) panel, made up of professional analysts, has slightly lowered its growth estimates for the euro area as a whole for this year, although it revised the bullish outlook for 2022, as reported on Friday. Monetary Authority.
Experts consulted by the central bank projections that the Eurozone GDP will grow 4.4% in 2021, which is a decrease of nine-tenths in relation to previous expectations. A number that is still higher than the estimate provided by the European Central Bank in December, when it calculated a rise in GDP of 3.9% for this year, although it is true that the body led by Christine Lagarde made a sharp cut in its forecast for 2021 compared to May, They expected 5% growth. Looking back to 2022, experts are raising growth to 3.7%, 1.1 more points, and for the first time assigning 1.9% growth to 2023.
The European Central Bank has yet to update its forecasts, but this Thursday, Lagarde had already assumed that the Eurozone GDP had contracted again in the last quarter of 2020 and that the weakness could extend into the first three months of 2021.
This forecast is confirmed by the preliminary reading of the Purchasing Managers’ Composite Index (PMI), compiled by IHS Markit for the month of January, which shows that the deterioration in private sector activity in the Eurozone increased at the start of 2021 as a result. The negative stalemate due to the impact of the second wave of the pandemic and the re-imposition of restrictions to contain it. Thus, the index fell to 47.5 points (taking into account that 50 points is the borderline between contraction and expansion). The number is lower than 49.1 in December and represents the worst reading of the composite PMI in the past two months, although it is higher than the low levels recorded in the first wave, during the spring of 2020. The number is present in the framework of the expectations of Reuters analysts who expected it to stand at 47.6 points.
The closure of the hotel sector in a large part of the eurozone countries led to the largest impact on the services sector, which has already accumulated the negative effects of the first and second waves affected by the tourism sector, which did not take place. I managed to track. As such, the services PMI declined to the second fastest pace since May, to 45 points from 46.4 the previous month. The manufacturing sector index also slowed its expansion to 54.7 points, compared to 55.2 in December.
“It seems inevitable that the Eurozone economy will suffer a double-dip recession,” said Chris Williamson, chief economist at IHS Markit. Although he indicated that the new crisis would not be as “serious” as the one last spring, taking into account “the resistance of the manufacturing sector and the increase in demand for exporting goods,” as well as the fact that the measures limiting the epidemic was not as stringent as it was a year ago. .
In Funcas, they also share a vision of this double-dip recession and lower GDP in the first quarter of the year. “Until vaccination is extended enough to remove restrictions, the European economy, like the Spanish economy, will not be able to foster a sustainable recovery, and will move with a steady ups and downs.”
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