European economy forecast to lag behind China, U.S.

Slow vaccine rollout will delay rebound until 2022, analysts predict

FRANKFURT—The European economy shrank 0.7 per cent in the last three months of 2020 as businesses were hit by a new round of lockdowns aimed at containing a resurgence of the coronavirus pandemic.

The drop from the previous quarter was not as sharp as experts had feared. But the official figures released Tuesday couldn’t erase a gloomier outlook for this year: the 19 countries that use the euro are forecast to lag China and the U.S. in bouncing back from the worst of the pandemic.

Tuesday’s figures from statistics agency Eurostat underscored a roller-coaster year of freakish economic data, with a plunge of 11.7 per cent in the second quarter, the biggest since statistics started in 1995, followed by a rebound of 12.4 per cent in the third quarter in late summer.

The winter wave of coronavirus infections has meant new restrictions on travel and business activity, although companies in some sectors such as manufacturing have been better able to adjust than services businesses such as hotels and restaurants.

The German economy, Europe’s biggest, grew by a scant 0.1 per cent in the fourth quarter while France saw a smaller than expected drop of 1.3 per cent. Overall, economists had expected a drop in the eurozone of as much as 2.5 per cent. For the year, the eurozone shrank 6.8 per cent.

The figures arrive amid disenchantment and finger-pointing over the slow pace of vaccine rollouts in the European Union.

“While the eurozone GDP data were better than what we were expecting only a week ago, the short-term prospects for the European economy remain clouded by a challenging health situation in several countries and an underwhelming start of the vaccination rollout,” said Nicola Nobile, lead eurozone economist at Oxford Economics.

The eurozone is expected to reach 2019 levels of economic output only in 2022, say officials from the European Central Bank. That contrasts with China, which has already regained the pre-pandemic level of output, and with the U.S., where congressional budget experts foresee a rebound to 2019 levels by the middle of this year.