Euro area GDP contract amid tight restrictions, vaccine rollout

On Monday, November 9, 2020, a restaurant closed during the lockdown on Mitropoulos street next to the Monastiraki intersection in Athens, Greece.

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LONDON – Europe’s Statistics Office said the euro zone economy shrunk 0.7% in the final quarter of 2020, as governments imposed social sanctions to stem the second wave of Kovid-19 infections.

Eurostat states that the initial reading of 6.8% of annual GDP contractions for the euro area in 2020 indicates.

The sector experienced a growth rate of 12.4% in the third quarter as low transition rates at the time allowed governments to partially reopen their economies.

However, the health emergency worsened in the last three months of 2020, with Germany and France moving forward as the national lockdown resumed. The tightening of social restrictions once again weighed on economic performance.

The data released last week showed that Germany grew 0.1% in the last quarter of 2020. Spain experienced a GDP growth rate of 0.4% over the same period, while France contracted 1.3%. The number came above analysts’ expectations and suggested that some businesses had learned to cope with the lockdown as best they could.

However, the three-month period also coincides with news of earlier coronavirus vaccine approval, which renewed optimism that the epidemic may end sooner than expected. However, the rollout has since been slow and bumpy, leading economists to fear that it would lead to too much economic recovery.

“Europe’s plans for vaccination and Brussels’ recovery from the deadlock with the UK and AstraZeneca have raised doubts over European recovery, raising fears of bureaucracy and chaos.” Gekeval Research said in a note on Tuesday morning.

In addition to the uneven distribution of Kovid-19 jabs, the number of daily cases has also increased in the new year amid the spread of new variants of the virus. Thus governments have decided to extend or revisit the lockdown to prevent proliferation.

In this context, the International Monetary Fund has lowered its growth expectations for the euro area in 2021. Last week the fund lowered its growth estimate for the region by 1 percent to 4.2% this year. Germany, France, Italy, and Spain – the four largest economies in the euro area – all saw their growth expectations plummet by 2021.


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