Compared to the previous forecast in the spring, the growth rate for 2021 is significantly higher in the EU (+0.6 pps.) and the euro area (+0.5 pps.), while for 2022 it is slightly higher in both areas (+0.1 pp.). Real GDP is projected to return to its pre‑crisis level in the last quarter of 2021 in both the EU and the euro area. For the euro area, this is one quarter earlier than expected in the Spring Forecast. Growth is expected to strengthen because activity in the first quarter of the year exceeded expectations and the improved health situation prompted a swifter easing of pandemic control restrictions in the second quarter.

Upbeat survey results among consumers and businesses as well as data tracking mobility suggest that a strong rebound in private consumption is already underway. In addition, there is evidence of a revival in intra-EU tourist activity, thanks to the entry into application of the new EU Digital COVID Certificate as of 1 July. Together, these factors are expected to outweigh the adverse impact of the temporary input shortages and rising costs hitting parts of the manufacturing sector. Inflation rates are slightly higher but expected to moderate in 2022. Uncertainty and risks surrounding the growth outlook are high, but balanced overall. They include the pace of vaccination campaigns, the response of households and firms to changes in restrictions, and the trend in inflation.

Credit: EC-GISCO, © EuroGeographics for the administrative boundaries