The weakness of the European economy continues

The European Central Bank (ECB) has not changed its macroeconomic forecasts for the eurozone, its head Christine Lagard said at a press conference after the meeting of the Governing Council. After a strong recovery in growth in the third quarter of 2020, euro area gross domestic product (GDP) fell by 0.7 percent in the last quarter of last year. It is estimated that for the whole of last year, real GDP fell by 6.6 percent, while the level of economic activity in the fourth quarter of last year was 4.9 percent lower compared to its pre-pandemic level at the end of 2019. Current indicators signal the continuing weakness of the economy in the first quarter of 2021. The reason is the ongoing pandemic and the associated restrictions. Therefore, euro area GDP is expected to decline in the first quarter as well. Economic development remains uneven across countries and sectors, with anti-pandemic restrictions affecting services more than industry, which is recovering faster. The ECB expects a significant recovery in economic activity in the euro area later this year. In the medium term, economic growth should continue to be supported by favorable financing conditions, expansionary fiscal policies and a recovery in demand for the phasing out of restrictions. The ECB's headline forecast projects euro area GDP to grow by 4 percent this year, 4.1 percent in 2022 and 2.1 percent in 2023. The economic outlook is virtually unchanged from the ECB's December forecast.