Europe’s economy shrank 0.6 per cent in the first three months of the year
as slow vaccine rollouts and extended lockdowns delayed a hoped-for
recovery – and underlined how the region is lagging other major economies
in rebounding from the coronavirus pandemic.
The fall in output for the 19 countries that use the euro currency was smaller
than the 1 per cent contraction expected by economists but still far short of
the rebound underway in the United States and China, two other pillars of
the global economy.
Figures announced Thursday showed the U.S. economy grew 1.6 per cent
during the first quarter, with business supported by strong consumer
demand. On an annualised basis, the U.S. grew 6.4 per cent.
In Europe, the second straight quarter of falling output confirms the region
is in a double-dip pandemic recession after a rebound in growth in the third
quarter. Two quarters of falling output is one definition of a recession.
France showed unexpected growth of 0.4 per cent compared to the quarter
before, while the main negative surprise came in Germany, the continent’s
largest economy.
Activity there shrank by a larger-than-expected 1.7 per cent as the
manufacturing sector was hit by disruption of parts supplies on top of the
hit to services and travel from pandemic-related restrictions on activity.
French authorities are anticipating the COVID-19 outlook in the country to
be better next month, when a greater proportion of the population will be
vaccinated. The government is slowly starting to lift partial lockdowns,
despite still-high numbers of coronavirus cases and hospitalised COVID-19
patients.
President Emmanuel Macron said Thursday that the outdoor terraces of
France’s cafes and restaurants will be allowed to reopen on May 19 along
with museums, cinemas, theaters and concert halls under certain
conditions.
Worry about a potential second straight lost vacation season has clouded
the outlook for Mediterranean countries Italy, Spain and Greece, which rely
heavily on tourism. Greece has lifted quarantine restrictions on visitors
from EU countries and will allow restaurants and cafes to reopen for
outdoor service from May 3. Travel receipts there sank 75 per cent last year.
Economists said they expected an upturn in the coming weeks as
vaccinations accelerate. The International Monetary Fund forecasts growth
of 4.4 per cent for the eurozone for all of this year.
Thus far, Europe’s unemployment rate has increased only gradually to 8.1
per cent in March, thanks to extensive furlough support programs that help
companies keep workers on. The US saw its jobless rate fall to 6.0 per cent
after spiking as high as 14.8 per cent during the worst of the pandemic.
A major factor holding back the recovery in Europe is the slow vaccine
rollout, which has led to prolonged lockdowns. Another is less fiscal support
for the economy from new government spending. U.S. President Joe Biden’s
USD 1.9 billion relief package, coupled with spending from earlier support
efforts, will mean additional cash support of about 11-12 per cent of annual
economic output for this year, according to economists at UniCredit bank.
By contrast, the European fiscal stimulus amounts to about 6 per cent of
gross domestic product, even after Europe’s more extensive social safety net
is factored in.
China was hit first by the pandemic but got it under control through strict
public health measures and was the only major economy to grow in 2020.
The U.S. was hard hit by the virus but has rolled out vaccinations at a rapid
pace.
Source: The Financial Express, India Monday, 03 May 2021