Eurozone – 2021-2022 Macroeconomic scenario: between promises and threats

Eurozone – 2021-2022 Macroeconomic scenario
  • The economy-health trade-off
  • A smoke-and-mirrors job market
  • Look out for the tidal wave!
  • Q4 2020-Q1 2021: Containing the current wave
  • Countervailing forces affect the outlook
  • Lowering the deficit while maintaining economic support: the 2021 budget challenge
  • The ECB provides further assurance against monetary hardening
  • Growth forecasts

In summary

A wave of optimism surged after it was announced that a vaccine would soon be available. However, the resistance of the pandemic’s spread to the latest restrictions to mobility is a warning that the link between virus and mobility is still strong. Our conviction is that this link will not be broken right away, and our scenario remains wedged between medium-term promises and short-term threats. We forecast GDP growth of 3.8% in 2021 and 3.9% in 2022.

Eurozone – 2021-2022 Macroeconomic scenario

Countervailing forces affect the outlook. On one hand, uncertainty as to how well the pandemic can be brought under control will continue to constrain spending decisions, both for consumers and investors, including in the second half of 2021. The crisis’ impact on bankruptcies and unemployment will gradually become visible in 2021, because the income support measures have been extended into the first few months of 2021. On the other hand, support for the economy remains massive. The ECB added some easing in December, leaving itself room to act, but signalling a lasting presence on the markets and a desire to maintain low rates all along the yield curve. Fiscal support is looking to be larger than expected in the 2021 draft budgets.