Eurozone Economic Forecast

Eurozone Economic Outlook

October 27, 2020

The economy should have rebounded in Q3, following the unprecedented blow dealt by coronavirus-related lockdowns in Q2, although the pace of recovery likely slowed towards the end of the quarter. Monthly increases in industrial output in July-August and upbeat manufacturing activity in September point to a recovery in the industrial sector. However, the services PMI fell back into contractionary territory in September, which, coupled with still-downbeat consumer confidence, indicates that the tightening of restrictive measures in some countries weighed on services-sector activity at the tail-end of Q3. Moving to Q4, rising Covid-19 cases and further restrictions throughout the region in October hint at weakening dynamics. Meanwhile, the 2021 draft budgets sent to the European Commission show countries will adopt expansionary fiscal stances next year, with the aggregate deficit expected at around 6.0% of GDP.

Eurozone Economic Growth

The economy should recover most of its lost output next year, supported by EU funding, ultra-loose monetary and fiscal stances, and strengthening external demand as the global economy reopens. That said, further restrictions, global trade tensions, a no-deal Brexit and rising levels of public debt pose downside risks. The economy is seen expanding 5.3% in 2021, which is down 0.2 percentage points from last month’s forecast. In 2022, GDP is seen increasing 2.9%.

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Eurozone Facts

Value Change Date
Exchange Rate1.120.65 %Dec 31

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