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FRANKFURT — Europe’s economy contracted in the first quarter of the year as a fresh wave of coronavirus outbreaks forced countries across the region into new lockdowns.
Preliminary Eurostat data showed the eurozone’s GDP contracted by 0.6 percent on the quarter in the first three months of the year, while the EU contracted by 0.4 percent over the same period. The weak start to 2021 follows a contraction of 0.7 percent in the eurozone and 0.5 percent in the EU in the final quarter of 2020, when the second wave of the coronavirus washed over the Continent.
Compared with the same quarter of the previous year, seasonally adjusted GDP decreased by 1.8 percent in the euro area and by 1.7 percent in the EU in the first quarter of 2020 after contracting 4.9 percent in the euro area and 4.6 percent in the EU in the previous quarter, the release showed.
“Now it is also official. The euro area economy slipped back into recession in the winter half-year 2020/21,” said Commerzbank economist Christoph Weil after the release of the data. “But a strong recovery should soon begin.”
Earlier this month, the European Central Bank said that incoming economic data, surveys, and high-frequency indicators pointed to a resumption of growth in the second quarter.
The ECB expects the eurozone to post a strong rebound in the second half of this year as the coronavirus vaccination campaign progresses and the region can gradually lift lockdown measures. The eurozone is expected to grow by 4 percent this year and 4.1 percent in 2022, according to March’s projections.
The slightly older European Commission forecasts put eurozone growth at 3.8 percent for this year and next while projecting growth for the European Union as a whole of 3.7 percent this year and 3.9 percent in 2022.
Still, Friday’s data confirms that Europe is lagging significantly behind the United States, which earlier this week reported robust growth at the start of this year.
In a separate release, Eurostat also reported eurozone annual inflation was seen rising 1.6 percent in April, marking the sharpest rise in two years. Price increases were driven by a 10.3 percent surge in energy prices. Most economists and policymakers expected a significant increase in price pressure this year, possibly even approaching the ECB’s rate of just below 2 percent, to remain temporary and ease again in 2022.
This article is part of POLITICO’s premium policy service: Pro Financial Services. From the eurozone, banking union, CMU, and more, our specialized journalists keep you on top of the topics driving the Financial Services policy agenda. Email [email protected] for a complimentary trial.
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