According to IMF’s latest estimations, Europe’s economy could recover to pre-pandemic levels in 2022, the IMF representatives said on Wednesday, adding that the estimates are dependent on the vaccination campaign against Covid-19.
During recent weeks, most of the European countries have been forced to introduce new restrictions or strengthen already implemented public health measures, as number of Coronavirus infections have significantly increased in all member states. This led to a 0.2% decrease in the IMF’s growth forecast for this year, which currently stands at 4.5%.
“Assuming vaccines become widely available in the summer of 2021 and throughout 2022, GDP growth is projected at 3.9% in 2022, bringing Europe’s GDP to a pre-pandemic level,” the IMF estimated in its recent regional economic analyses.
Economic outlook still uncertain. Vaccination speed slow
However, uncertainty about how the pandemic will evolve continues to make the economic outlook uncertain, especially from the speed of vaccination perspective. “There is a mystery about how quickly the third wave can be defeated, which we do not have in the forecast, and it is certainly a negative risk,” Alfred Kammer, director of the IMF’s European department, told CNBC. “There is also a risk that vaccination will be slower than we all expect now,” he said, before adding: “We need to be prepared for the virus to catch us again.”
In fact, the 27 members of the European Union have received new bad news last week, with Johnson & Johnson announcing that it will delay the launch of its vaccine in Europe, after US authorities expressed concerns about the extremely rare complications of blood clots following vaccination.
This vaccine was one of four on which the EU community relied to accelerate its vaccination campaign in the second quarter of 2021.
Inflation expected to rise until end of 2021
The IMF also expects prices to rise in Europe throughout 2021. “Inflation, currently limited by economic weakness, is expected to accelerate by 1.1 percentage points in 2021 to 3.1%, partly due to higher commodity prices,” the fund said in its report.
Rising inflation could force the European Central Bank to adjust its highly permissive monetary policy.
For the EURO area, the European Central Bank estimates that year-end inflation could be 2%. This level is important for the Central Bank, given that its mandate is to ensure that inflation remains “close to but below 2%”.