It is no secret that the coronavirus pandemic created a lot of issues and it would take time to deal with all challenges. Importantly, it was a tough year for the eurozone. Unfortunately, its economy dropped by 0.7% in the final quarter of 2020 as governments implemented measures to contain the second wave of Covid-19 infections.
According to Europe’s statistics office, a preliminary reading points to an annual gross domestic product (GDP) contraction of 6.8% for the euro area in 2020.
As a reminder, the region experienced a growth rate of 12.4% in the third quarter of the year. Importantly, slow infection rates at the time had allowed governments to partially reopen their economies. This is not the end of the story as the situation deteriorated in the last three months of 2020. For example, Germany, as well as France, reintroduced national lockdowns to improve the situation.
People should take into account that the social restrictions affected the economic performance once again. It is not surprising that such measures affected the bloc’s economy.
Economy and coronavirus vaccine
According to the data released last week, Germany’s economy grew 0.1% in the final quarter of 2020. Interestingly, Spain experienced a GDP growth rate of 0.4% in the same period while France contracted by 1.3%.
It is worth noting that, the last quarter of the year coincided with the news of the first coronavirus vaccine approvals, which renewed optimism that the pandemic could come to an end sooner than expected. Nevertheless, countries are struggling to cope with problems related to the coronavirus vaccine. Moreover, this factor has the potential to delay the much-needed economic recovery.
There are other problems as well. For example, in addition to the uneven distribution of Covid-19 jabs, the number of daily cases also increased in 2021 amid the spread of new variants of the virus.
Importantly, the International Monetary Fund lowered its growth expectations for the euro area in 2021. Interestingly, the fund cut its growth forecast for the region by 1 percentage point to 4.2% this year. The International Monetary Fund made the decision last week. Moreover, Germany, France, Italy, and Spain all saw their growth expectations reduced in 2021. As a reminder, the countries mentioned above have the largest economies in the eurozone. It will take time to boost the eurozone economy, as companies still endure huge losses and it won’t be easy to return to pre-coronavirus results in a short period of time.