Eurozone's 2021 growth seen at 4.8%

Brussels, Belgium – The European Commission issued a sharply increased growth forecast on Wednesday, predicting that the eurozone economies will expand by 4.8 per cent this year.

Brussels had been expecting a 4.3 per cent growth rate as the single-currency area recovers from the effects of the coronavirus pandemic and associated lockdowns.

The new growth forecast for the eurozone now matches that for the 27-nation European Union as a whole, and both are now expected to grow at 4.5 per cent in 2022.

Last year's 6.5 per cent drop in eurozone output, -6.0 per cent in the EU as a whole, was a record fall, and now the recovery looks on course for a record climb.'Growth is expected to strengthen due to several factors,' the European Commission statement said. First, activity in the first quarter of the year exceeded expectations.

'Second, an effective virus containment strategy and progress with vaccinations led to falling numbers of new infections and hospitalisations, which in turn allowed EU member states to reopen their economies.'

The commission also revised its inflation forecast upwards.

It now expects a rate of 1.9 per cent in 2021 and 1.4 per cent in 2022 in the euro area.

In the EU, consumer prices are expected to rise slightly faster, by 2.2 per cent this year – up 0.3 percentage points compared with the spring estimate – and by 1.6 per cent next year.

But the commission did not express concern, adding: "In 2022, these pressures should moderate gradually as production constraints are resolved and supply and demand converge."