European Commission forecasts: July 2021

Bathers seen sunbathing at Malagueta beach during a hot summer day in Malaga.

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LONDON — The economic outlook has improved for the euro zone, according to the European Commission’s latest forecasts on Wednesday, but the institution warned that the delta variant is a “stark reminder” that the pandemic is not over.

The executive arm of the EU had projected in May a 4.3% GDP rate for the euro area in 2021, followed by a 4.4% GDP rate in 2022. Now, the commission has updated its forecasts and is expecting a 4.8% growth rate this year, and 4.5% for 2022.

In comparison, the European Central Bank said in June that the euro area should grow 4.6% in 2021 and 4.7% next year.

“The EU economy is set to see its fastest growth in decades this year, fueled by strong demand both at home and globally and a swifter-than-expected reopening of services sectors since the spring,” Paolo Gentiloni, the EU commissioner for the economy, said in a statement.

Based on the latest forecasts, the commission expects the euro area to return to its pre-crisis levels in the last quarter of this year — meaning one quarter earlier than expected.

However, Gentiloni also said: “Crucially, we must redouble our vaccination efforts, building on the impressive progress made in recent months: the spread of the Delta variant is a stark reminder that we have not yet emerged from the shadow of the pandemic.”

The latest economic forecasts come at a time when policymakers are increasingly worried about surging Covid-19 infections. In France, for instance, the government has raised the possibility of a fourth wave in late July — something that the country’s finance minister described as “the single thing that might jeopardize the economic recovery.”

According to the latest forecasts, France could grow at a rate of 6% this year from an earlier estimate of 5.7%.

Looking at Europe’s traditional economic engine, Germany, the commission is now expecting a GDP rate of 3.6% in 2021, versus 3.4% estimated in May.

Tourism revival

The commission also mentioned that “there is evidence of a revival in intra-EU tourist activity, which should further benefit from the entry into application of the new EU Digital COVID Certificate as of 1 July.”

This document allows people which have tested negative for the virus, have recovered from it, or have been fully vaccinated, to travel more easily within the 27-member bloc. This is critical for tourism-dependent economies, namely Greece, Spain, Italy and Portugal.

Spain is projected to grow by 6.2% this year, the second highest growth rate in the bloc.

The commission noted that there has been more hiring in recent weeks in Spain and that business and consumer sentiment has also improved in the EU’s fourth largest market.