A restaurant closed during lockdown on Mitropoleos Street along Monastiraki Square in Athens, Greece, on Monday, November 9, 2020.
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LONDON – The eurozone economy fell 0.7% in the last quarter of 2020 as governments tightened social restrictions to contain a second wave of Covid-19 infections, the European Statistics Office said on Tuesday.
A preliminary reading indicates an annual GDP contraction of 6.8% for the euro area in 2020, Eurostat said.
The region experienced a 12.4% growth rate in the third quarter, as the then low infection rates enabled governments to partially reopen their economies.
However, the health emergency has deteriorated in the last three months of 2020, with Germany and France going so far as to reintroduce national closures. The tightening of social constraints weighs economic performance once again.
Data released last week showed that Germany grew by 0.1% in the last quarter of 2020. Spain had a GDP growth rate of 0.4% in the same period, while France grew by 1.3% has shrunk. The numbers exceed analysts’ expectations and indicate that some companies have learned how to tackle the closures as well as possible.
However, the three-month period also coincided with news of initial approvals for coronavirus vaccination, which renewed optimism that the pandemic could end sooner than expected. Since then, however, the rollout has been slow and bumpy, and economists feared it would delay the much-needed economic recovery.
“The failure of Europe’s vaccination plan and the withdrawal of Brussels from its absence with the United Kingdom and AstraZeneca have raised doubts about a European recovery, confirmed the worst caricatures of dangling bureaucracy and fears that the European Union could break up, revived, “Anatole Kaletsky, founder of Gakeval Research, said in a note Tuesday morning.
In addition to the uneven distribution of Covid-19 samples, the number of daily cases also increased in the new year amid the spread of new variants of the virus. Governments have therefore decided to expand or reinstate locks to contain the distribution.
In this context, the International Monetary Fund has lowered its growth expectations for the euro area in 2021. The Fund lowered its growth forecast for the region last week by 1 percentage point to 4.2% this year. Germany, France, Italy and Spain – the four largest economies in the eurozone – have all lowered their growth expectations for 2021.