Slow vaccine deployment is the biggest economic risk to the eurozone

Written by Richa Rebello

BENGALURU, April 16 (Reuters) – The eurozone economy is set to grow at a much slower pace this quarter than previously predicted a month ago, according to a Reuters poll. .

Britain and the United States have successfully vaccinated the majority of their populations, but the use of the vaccine in the complex eurozone has recently become more complex as rates of infection have increased.

A Reuters poll from April 12 to 15 showed that the recession would emerge from a double recession and grow by 1.5% this quarter, a sharp drop from the 2.1% forecast in March and the lowest consensus since a survey in October.

More than 90% of economists who answered the additional question, or 38 out of 42, already said that the greatest risk to the moderate outlook would be vaccine reduction.

Of the economists who said the biggest risk was the reduction of the vaccine, 85% lowered or kept their growth forecast unchanged in the second quarter.

“Things got tough for Europe in the first quarter, which will have a negative impact on the first half of the year,” said Juan Mumlet, a senior euro economist with the Society General.

“If the use of vaccines is not accelerated as much as we believe, it means that deregulation will take place later and it will be too late to return to default.”

The volume is expected to expand by 2.3% in the third quarter and 1.3% in the fourth quarter, which will not change from March. But the range of forecasts for quarterly growth showed a low rise.

On an annual basis, the eurozone economy is expected to grow by an average of 4.1% in 2021, the lowest forecast since last month’s 4.3% forecast and a survey conducted in April last year.

This was lower than the International Monetary Fund’s forecast of 4.4%.

By 2022, growth is projected at 4.1%, down from 4.2%.

The coalition’s three major national economies are expected to grow at a very slow pace in 2021 compared to January’s expectations.

The consensus for growth in Germany was previously 3.7%, while the outlook for France and Italy was reduced to 5.4% and 4.1%, respectively, to 5.9% and 5.1%.

“Our Eurozone view, based on a downward correction in the first half of the year caused by epidemic damage, then rose again in the summer, with very moderate growth for 2021 and 2022.” Luis said Hario is a Eurozone economist at CA-CIB.

“The growth gap between the eurozone and other major advanced economies is widening and the inter-regional fragmentation continues. France and Germany must return to pre-crisis GDP by mid-2022; Italy and Spain are unlikely to achieve that yet by the end of 2022.”

When asked about the risks to their inflation outlook for the next year, more than 80% of economists, or 30 out of 37, said they prefer the reverse.

The consensus is that inflation rose to an average of 2.1% in the fourth quarter of 2021, but fell to 1.2%, 1.3%, 1.3% and 1.3% each quarter for the following year, respectively.

When asked when the European Central Bank will begin to cut its emergency procurement plan, about 60% of economists, or 21 out of 37, said it would happen in the second quarter of 2022 or later.

When the head of the Dutch central bank Glasnot said that the company would withdraw its purchase of emergency bonds in the third quarter and begin to complete in March 2022, according to the plan, only a handful of economists said that the beginning of the second half of 2021 would be seldom.

“The eurozone economy has not fully recovered from the epidemic even by the end of 2022. The ECP will seek to assure investors that the bank has sufficient firepower and flexibility,” said Andrew Kenningham, chief economist for Europe from the capital economy. .

“The best way to provide this peace of mind is to extend the duration of the emergency purchase plan.”

(Information by Richa Rebello, review by Indiradeep Ghosh and Vivek Misra; edited by Rahul; translated by Michael Soos by Kdansk Karunagar and Catherine Evans)