Euro zone economy slips into another recession as Covid lockdowns bite

Euro zone economy slips into another recession as Covid lockdowns bite [ad_1]

People stroll previous the closed iconic brasserie Les Deux Magots

LUDOVIC MARIN | AFP | Getty Images

LONDON — The euro zone economy contracted within the first quarter of 2021 as international locations carried out new lockdowns and restrictions amid a 3rd wave of coronavirus infections.

Gross home product within the area fell by 0.6% quarter on quarter, in keeping with preliminary information launched by Europe’s statistics workplace Eurostat.

It marks the second consecutive quarter of contractions, which means the area is in a technical recession, though economists are optimistic about progress wanting forward.

Most of the area’s largest economies — Germany, Italy and Spain — noticed a decline in exercise throughout the first three months of the yr. The sharpest fall in exercise occurred in Portugal, which has confronted a wave of latest Covid instances and led to the nation’s second lockdown.

French shock

Contractions elsewhere

However, in Germany, the economy contracted 1.7% over the identical interval. It’s worse than the 1.5% decline that analysts surveyed by Reuters had been anticipating.

The nation has been severely hit by a 3rd wave of Covid infections, and totally different approaches amongst its numerous areas have additional sophisticated its combat in opposition to the pandemic.

In Italy, the most recent GDP numbers confirmed a contraction of 0.4% for the quarter, barely higher than expectations.

The Spanish economy additionally shrank over the identical interval, by 0.5%, whereas Portugal’s financial exercise contracted by 3.3%.

Looking forward, nevertheless, economists are assured about 2021 for the euro zone.

“Confirmation that the euro-zone economy contracted again in Q1 (first quarter) means that the region suffered a second technical recession in just over a year,” analysts at Capital Economics mentioned through e-mail.

“The good news, however, is that things should get better towards the end of Q2 as the vaccination program will allow governments to lift restrictions, hopefully for the last time.”

Stimulus and vaccines

Countries within the area are as a result of begin receiving EU-wide Covid help funds within the second half of the yr. Several nations have already submitted their plans on how they intend to make use of the funds for evaluation by the European Commission.

“It is important the plans are in line with our targets,” European Commission commerce chief Valdis Dombrovskis mentioned Friday on CNBC’s “Street Signs Europe.”

The Brussels-based establishment requested nations to spend at the very least 37% of the stimulus on local weather insurance policies, and 20% on the digital transformation.

“The funding will be available to member states once they complete certain milestones and targets,” he added.

In addition, the vaccination marketing campaign has accelerated considerably because the begin of 2021, which can also be boosting progress expectations for the area.

The European Union expects to have 70% of the grownup inhabitants vaccinated this summer season, and tourism-reliant international locations are hoping {that a} bigger variety of vaccinated individuals will enable them to have a extra profitable summer season season this yr.

“Vaccination is gathering pace,” Dombrovskis mentioned, regardless of an preliminary slowdown within the rollout as a result of AstraZeneca was “underdelivering.”

The pharmaceutical agency, which has developed a Covid vaccine, has failed to satisfy the EU’s expectations for vaccine deliveries. The area was anticipating 120 million doses within the first quarter, however solely about 30 million had been delivered. For the second quarter, the EU was anticipating 180 million doses however AstraZeneca has already mentioned it’d ship solely about 70 million.

The commission filed legal action against the pharma giant last Friday and a Brussels court docket has already begun inspecting the case, which might be concluded as early as June.

AstraZeneca was not instantly accessible for remark when contacted by CNBC on Friday.

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