EMU: Economy predicted to expand 5.2% in 2021 – UOB

Economist at UOB Group Lee Sue Ann assesses the recent GDO figures in the euro area.

Key Quotes

“The Eurozone’s GDP fell by 0.6% q/q in 4Q20, less than the 0.7% q/q contraction of the first estimate. This contraction follows a strong rebound of 12.4% q/q in 3Q20, when COVID19 pandemic restrictions were eased. In the second quarter of the year, the Eurozone economy had suffered a historic contraction of 11.7% q/q. Compared with the same quarter of the previous year, GDP, however, decreased by 5.0% y/y. This compares with a 5.1% y/y drop expected. For 2020, the Eurozone economy shrank by 6.8%.”

“Meanwhile, employment decreased by 2.0% y/y in the Eurozone. The decrease in the fourth quarter follows a fall of 2.3% y/y in the third quarter of 2020… So far, the rise in unemployment in the Eurozone has been limited, in part thanks to government programs that pay the wages of furloughed workers.”

“The European Commission, last week, cut its Euro Area economic outlook for this year to 3.8% from 4.2%, and said developments largely depend on the success of the region’s immunization efforts.”

“Indeed, the success and distribution of vaccines, and how the COVID-19 pandemic evolves will drive both upside and downside risks to our Eurozone growth outlook of 5.2% in 2021. If infections were to increase further, requiring more stringent containment measures, then confidence would remain weak for a longer period and increase precautionary savings, thereby negatively affecting consumption and investment.”