Euro zone 2021 rebound muted by second COVID wave - Commission

Reuters reports that according to the European Commission forecast, the euro zone will rebound in 2021 from its unprecedented coronavirus recession this year, but the recovery will be smaller than previously expected because of the second wave of infections.

European Commission cut the euro zone growth forecast for next year to 4.2% from 6.1% predicted in July and saw 3.0% growth in 2022 after an unprecedented 7.8% recession this year.

The Commission said its forecast assumed COVID-related restrictions would remain, to some degree, until 2022, but that they would be gradually ease next year and that their economic impact would diminish over time.

The Commission expects the euro zone economy will contract 0.1% in the last quarter against the previous three months due to new restrictions to stem the second wave of the pandemic.

Euro zone inflation, which the European Central Bank wants to keep below, but close to 2% over the medium term, is to stay at 0.3% this year, and rise to 1.1% in 2021 and 1.3% in 2022.

Thanks to government short-time work schemes introduced at the start of the pandemic, unemployment in the euro zone is to rise to only 8.3% this year despite the deep recession, from 7.5% in 2019. It is to increase to 9.3% in 2021 and then fall again to 8.9% of the workforce in 2022.