Regional Economic Outlook for Europe, October 2021
Regional Economic Outlook, October 2021
Source details
- Canonical URL
- Regional Economic Outlook for Europe, October 2021
Other formats
Bibliographic details
- Published: October 20, 2021
Overview
- An increasingly resilient recovery is taking hold in Europe, buttressed by gradual increases in vaccination rates and mobility.
- Strongly accommodative macroeconomic policies and COVID-19 support schemes have helped preserve employment relationships and protect private sector balance sheets.
- Uncertainty remains elevated because of the risk of new infection waves and virus variants amid uneven vaccination rates across countries.
- It is imperative to continue increasing vaccinations, notably in emerging European economies, and to strongly support international efforts to speed up vaccine access globally.
Growth forecasts and trajectory
- Advanced European economies are forecast to expand by 5.2 percent in 2021.
- Emerging European economies are forecast to expand by 6 percent in 2021.
- These 2021 forecasts are 0.3 and 1.1 percentage points higher, respectively, than in the July 2021 World Economic Outlook Update.
- The recovery is expected to consolidate in 2022 with growth projected at:
- 4.4 percent in advanced European economies.
- 3.6 percent in emerging European economies.
- Risks are tilted to the downside owing to potential virus mutations, prolonged supply disruptions, and high energy prices among others.
Policy recalibration and fiscal stance
- The exceptionally strong fiscal support deployed in 2020–21 can be reoriented toward "building forward better" and scaled back to rebuild room for fiscal policy maneuver while continuing to shore up the recovery.
- Policies should be adapted flexibly, reflecting country-specific developments.
- Policy guidance emphasizes that support can be scaled back appropriately while continuing to shore up the recovery, and should be reoriented to building forward better and facilitating economic transformation.
Pandemic impacts and cross-country heterogeneity
- The COVID-19 pandemic spared no country but the associated economic losses in 2020 varied substantially across Europe.
- Emerging market economies in Europe experienced, on average, significantly shallower recessions than advanced economies in Europe.
- Differences in 2020 growth outcomes can be largely explained by differences in underlying growth trends, mobility, pre-pandemic fundamentals, and macroeconomic policies.
- The smaller output losses in emerging market economies in Europe can be attributed to higher underlying growth and younger populations.
Sectoral reallocation and labor-market challenges
- The COVID-19 crisis has hit some sectors far harder than others.
- The pandemic is likely to accelerate reallocation of inputs in Europe over the medium term, based on past experiences and advance signals from financial markets.
- Transition challenges loom large especially for low-skilled workers who may have a hard time integrating into expanding sectors because of missing skills.
- Policies can play an important role in facilitating needed reallocation and minimizing the transition costs of those adversely affected.
Regional Economic Outlook for Europe, October 2021
Content in this bundle
- Chapter 2 Annex
- Chapter 3 Annex
- Full Report
- Zusammenfassung