The European economy has recovered faster than expected. However, due to disproportionate vaccination rates, surge of COVID-19 cases, skyrocketed energy prices, bottlenecks and disruptions in global supply, its expansion still heavily dependent on the evolution of pandemic.
The EU GDP is expected to achieve growth rates of 5%, 4.3% and 2.5% in 2021, 2022 and 2023 respectively. The rate of GDP growth in the second quarter of 2021 (almost 14% in annual terms) was as high as the fall in GDP in the same period last year. It has brought the European economy to the pre-pandemic output level and moved its market from recovery to expansion. As for unemployment level, the Union has not yet achieved the pre-crisis one (still 1% above), but shortened it significantly with 1.5 million new jobs created in the second quarter of 2021.
However, energy prices, which are way above the pre-crises level, are projected to negatively affect consumption and investment, while the above-productivity wage increases may pass on to consumer prices and cause inflation. The Union has to act to boost its economic potential and remain vigilant to the Covid-19 evolution.
Autumn 2021 Economic Forecast: From recovery to expansion, amid headwinds