According to the latest forecast released on Wednesday, May 12, the European Commission appears to be relatively optimistic about the extent of economic recovery in the euro area. By the end of 2021, we should return to pre-crisis levels of economic activity. In this regard, especially in France, there is a growing voice among economists in favor of new recovery plans.
European Commission raises its growth forecast
Published Wednesday, May 12 European Commission’s latest economic forecast is optimisticEven if it occurs in a situation characterized by the resurgence of the recession in the euro area. European institutions expect 2021 European Union (EU) and Eurozone gross domestic product (GDP) growth of 4.2% and 4.3%, respectively, and 4.4% in both the EU than the 2022 Eurozone. doing. Therefore, this economic recovery should allow the euro area to return to the level of economic activity at the end of 2019, before the Covid-19 pandemic, at the end of 2021...
According to the European Commission Private consumption will be the main driver of this economic recovery.. The household savings rate is projected to drop to 13.6% in 2022. This reached nearly 19.4% in 2020, affected by the Covid-19 pandemic and related sanitary facility restrictions. Economic recovery is also driven by external demand.. In fact, the European Commission estimates that the two US reconstruction plans voted at the end of 2020 and March last year will contribute to an increase in EU GDP of 0.3 and 0.2 percentage points in 2021 and 2022, respectively. I am.Finally, the European Commission predicts it Favorable funding conditions, In connection with low interest rates and accommodative monetary policy implemented by the European Central Bank Allows for increased investment, Especially the general public. Therefore, public investment could reach 3.5% of GDP in 2022, the highest level since 2010.
Uncertainty Focusing on European Economic Recovery
As with all economic forecasts, and even more so during a pandemic, the Commission’s forecasts Various uncertainties, May disable them. Among these:
- Covid-19 Pandemic Evolution and Immunization Campaign in Europe.. The Commission’s forecast is based on the assumption that the relaxation of health restrictions in the second half of 2021 will accelerate. Therefore, a new epidemic “wave” can confuse these predictions. Similarly, the Commission has assumed in its calculations that the growth of viral variants does not interfere with the ongoing vaccination campaign against coronavirus.
- Evolution of productive fabrics in each country.. For the time being, especially the wealthiest European companies have benefited from safety nets that allow them to persist, despite the extent of the economic crisis. However, the future wave of bankruptcy has not been ruled out by the European Commission. If that happens, it will put pressure on consumption and investment, and thus ultimately on overall economic activity.
- Evolution of budget policies implemented by various European countries.. The European Commission has specifically warned against the premature implementation of measures aimed at restoring the balance of public accounting. Such measures, known as austerity, can, in fact, limit economic recovery.
Need another recovery plan?
Indeed, the European Commission’s forecast released last week is relatively optimistic compared to previous forecasts. But this unexpected recovery will occur a year later, characterized by an unprecedented economies of scale. Therefore, even if the euro area returns to activity levels at the end of 2019 at the end of 2021, it will lose the equivalent of two years of economic growth during this crisis...
In this regard, some European economists are calling for the implementation of new recovery plans. For example in France Jean Pisani Ferry and Olivier Blanchard believe that it is possible to “completely eliminate the consequences” of the crisis associated with the Covid-19 pandemic. It supplemented the recovery plan totaling € 100 billion and was presented in September with new budgetary measures. According to these two economists, additional public spending of € 50-60 billion will allow France to return to its own growth trajectory without a pandemic...
Jean Pisani-Ferry and Olivier Blanchard first proposed Increased state investment effortsEspecially in professional training and mobility. they again, Measures to support the recovery of companies that are considered feasible (In contrast to “zombie” companies).Finally, the two economistsPart of this additional spending towards the most modest householdsTo revive consumption.