Time.news – IEurozone GDP will close down 0.4% in the first quarter of the year, before recovering and rising by 1.5% in the second and 2.2% in the third. The estimate is contained in the Eurozone economic outlook edited by Istat, Ifo and Kof.
“The forecast framework”, the report emphasizes, is subject to a high degree of uncertainty determined by the resumption of infections in many European countries. On the one hand, vaccination campaigns seem to proceed more slowly than expected accompanied by constant difficulties in finding the doses. On the other hand, the start of the use of funds from the Next Generation Eu plan should support the recovery in the euro area starting from the third quarter of 2021.
Furthermore, the signs of recovery in the US and Chinese economies are a stimulus for global growth. The downside risks are linked to the third wave of infections and the possible extension of the containment measures that would delay the economic recovery “.
The recovery of manufacturing
In the first months of the year, Istat, Ifo and Kof explain, the manufacturing sector showed positive signs. In January, industrial production increased (+ 0.8% compared to the previous month). France and Italy recorded the most marked increases, while production in Spain and Germany contracted slightly. In February, the ESI indicator increased driven by improvements recorded in the manufacturing sector, widespread among the components. For the other sectors, however, the increase was more contained.
“The short-term outlook is very uncertain especially for the services sector. The start of vaccination campaigns in the countries of the area is a positive signal for expectations. However, from the beginning of March onwards, the pandemic situation began to worsen almost everywhere with a resumption of containment measures in some countries. However, these negative effects are expected to have only a transitory impact on the economy, “the report reads.
Industrial production is expected to show a cyclical increase of 1.6% in the first quarter of 2021 and then decelerate between April and June (+ 1.2%) when the growth rate on an annual basis will be higher than 24%, compared to the same months of 2020 marked by the presence of the lockdown period, which had characterized almost all the countries of the ‘area. In the third quarter of 2021, the economic trend would record a further improvement (+ 1.3%).
Investments in slow motion
The recovery of investments would follow a slower pace. On one side, the underutilization of production capacity and the high uncertainty about the evolution of the pandemic will negatively influence the expectations of companies. On the other hand, the recovery phase of international trade is expected to continue, supported by the decisive strengthening of production rates in China and the United States.
Consequently in the first quarter, gross fixed investments would maintain a weak economic profile (+ 0.2%) and then accelerate in the following two quarters (respectively + 1.5% and + 1.9%), benefiting from the start of the use of funds from the Next Generation Eu program and the acceleration of vaccination campaigns.
Private consumption should decrease in the first quarter (-1.5%) due to the new containment measures, but are expected to rebound in the second and third quarters (+ 1.8% and + 2.9%, respectively).
Inflation towards a slight rise
In the first quarter, the trend inflation rate should be + 1.1%. On the basis of the technical assumptions that over the forecast horizon the Brent price will remain at the level of 62 dollars a barrel and that the dollar / euro exchange rate is stable at 1.21, the pressure on prices should increase slightly starting from the second quarter linking to the recovery in demand and the robust trend growth in oil prices. The annual growth rate of the IPCA, the harmonized index, will accelerate to 1.8% in the second quarter and to 2.1% in the third.
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