The EU Economy May Usher in A Strong Rebound

The EU Economy May Usher in A Strong Rebound

The unprecedented new crown pneumonia epidemic has left deep scars on the European economy and society. Most countries in the EU are still suffering from the spread of the epidemic and urban blockades. The expected V-shaped economic rebound will take a while. People pin their hopes on controlling the spread of the virus through widespread inoculation of the new crown vaccine, and only then will the economy and society truly reopen and recover.

　　 The economic performance of the EU in 2020 is worrying, and the euro area countries generally face unprecedented and difficult challenges. However, after the severe winter, the spring of the EU economy may be approaching.

　　 International Monetary Fund (IMF) statistics show that the euro zone economy will decline by 6.8% in 2020. Economic growth began to slow down in the first quarter of last year. The new crown pneumonia epidemic hit Europe in the second quarter. Eurozone GDP fell by nearly 12%. By the third quarter, there was a sharp rebound of 12.4%. However, in the fourth quarter, it was again due to the epidemic. Spread and regress.

　　 The 2021 winter economic forecast recently released by the European Commission shows that the EU economy will grow by 3.7% in 2021 and 3.9% in 2022; the euro zone economy will grow by an average of 3.8% this year and next. The report believes that the EU economy will continue to be sluggish in the first quarter of this year, but with the progress of the new crown vaccination plan and the gradual relaxation of prevention and control measures, economic growth is expected to resume in the second quarter and begin a full recovery in the second half of the year.

　　According to the data analysis of the Organization for Economic Cooperation and Development (OECD), the performance of the economies in the euro area varies greatly. The Spanish economy will be hit hardest in 2020, with GDP falling by nearly 12%, France and Italy falling by 9.1%, and Germany falling by 5.5%. Denmark, Finland, Sweden, Poland and Ireland's GDP declines were relatively small, ranging from 3% to 4%.

　　 This set of data actually reflects the severity of the epidemic in various countries. Italy and Spain were the first to be hit by the epidemic and imposed a longer and stricter blockade, so the economy was hit harder. In addition, countries dominated by tourism have suffered more losses than other countries, and Germany, which is more dependent on manufacturing and exports, has benefited from an unexpectedly rapid recovery in world trade. Since the third quarter of last year, the European economy has rebounded rapidly following the rapid recovery of global trade. The export-oriented euro zone economy has shown a strong V-shaped rebound, especially the manufacturing industry that has benefited first, preventing a full-scale collapse. However, the service industry is still plagued by the blockade, and the catering, aviation, and hotel industries have suffered heavy losses. This has led to the divergence of the European economy. After the Purchasing Managers Index PMI reached an 18-month high in December last year, it remained at a high level in January this year, while the PMI of the service industry continued to decline.

　　 Although the EU’s economic recovery was interrupted by a new round of the spread of the epidemic, and the recovery of some euro area countries showed a W-shape, good economic fundamentals indicate that once the epidemic in Europe is under control, a strong economic rebound may occur at any time. It is worth noting that the Eurozone manufacturing index has been in the expansion range for many consecutive months, and the economic recovery momentum of countries with a large proportion of manufacturing industries such as Germany and the Netherlands has been more obvious. What's more, retaliatory consumption in the post-epidemic era is also one of the important driving forces of the EU's economic recovery.

　　 Judging from the current situation, during the epidemic period, European residents' consumption expenditures have been greatly reduced, while savings have increased significantly. On the one hand, consumers usually respond to economic recession by holding more cash; on the other hand, because most leisure activities and travel are prohibited, consumers passively save money. According to estimates by the Oxford School of Economics, the euro zone savings rate has risen from 13% in 2019 to 19% in 2020, which means that euro zone households have increased their deposits by approximately 450 billion euros last year. According to research conducted by Deloitte, the historical decline in European GDP has surprisingly limited impact on the labor market in the Eurozone. The official unemployment rate rose from 7.4% in 2019 to 8.4% in 2020, an increase of only 1 percentage point. This is mainly because many eurozone countries quickly implemented economic assistance policies to ensure corporate mobility, ensuring the basic stability of employment, company survival and disposable income. This allows the residents of the entire Eurozone to have more disposable income. Some analysts believe that the accumulated excess savings will sooner or later be converted into consumer spending, and sustained low inflation and large-scale policy support should help support a strong economic rebound in the third quarter of this year.

　　 Of course, the uncertainty of future epidemic control and economic recovery is still high. Studies have found that effective vaccines and their rapid promotion can increase EU economic growth by about 3 percentage points. Right now, the European Union is stepping up the implementation of the 1.2 trillion euro mid-to-long-term budget and the 750 billion euro recovery fund to push the economy back to the growth track.

　　 Seeking opportunities in danger. The EU's proposal of "using the crisis as an accelerator for the transition of green and digital development" is precisely its strategic choice for the development of a green economy. Relying on its strong resilience and focus to respond to crises, the EU hopes to seize the opportunity in the new round of green revolution and occupy the global dominance and commanding heights in the fields of industrial competition, high-tech R&D, and technical standards. The trump card was held tightly in his hand.