July 7 (National Post) — BRUSSELS – The European
Commission revised upward on Wednesday its estimates for euro
zone growth this year and next, but warned against risks posed
by new variants of the coronavirus that should be contained to
avoid new restrictions.
The European Union executive arm also expected higher
inflation this year for the 19-nation currency bloc than it had
previously forecast, but estimated consumer prices growth will
slow next year.
The EU Commission predicted the euro zone will grow by
4.8% this year, much faster than the 4.3% growth it had
forecast in May.
The large revision is largely due to the reopening of the
bloc’s national economies in the second quarter which benefited
the services sector and is expected to boost tourism within the
EU, the Commission said.
The rebound from the economic crisis caused by the
pandemic is projected to continue next year, when the euro zone
is forecast to grow by 4.5%, more than the 4.4% expansion
estimated in May.
The Commission warned however that risks about the outlook
remained high, although they were seen as balanced.
It urged the further stepping up of the vaccination
campaign to contain threats posed by the spread and emergence
of variants of the coronavirus, and in particular by the more
transmissible Delta variant. Delta is expected to become
dominant in Europe this summer, the Commission said citing
estimates from the EU disease prevention agency.
«We must redouble our vaccination efforts, building on the
impressive progress made in recent months: the spread of the
Delta variant is a stark reminder that we have not yet emerged
from the shadow of the pandemic,» said EU economics
commissioner Paolo Gentiloni.
A faster vaccine rollout is seen as the key measure to
avoid a re-tightening of containment measures against the virus
which in turn could affect growth. However, the vaccination
drive «may start hitting acceptance constraints,» the
Commission acknowledged.
Despite the concerns, Brussels revised upwards its growth
forecasts for this year for the three largest economies of the
bloc, with France seen expanding by 6.0%, Italy by 5.0% and
Germany by 3.6%.
Next year, growth will accelerate to 4.6% in Germany and
is expected to remain strong at 4.2% in both France and Italy,
although the forecast for Italy was cut slightly from the
previously estimated 4.4%.
Inflation, which has become one of the main concerns for
economists as global economic growth accelerates, is projected
to reach 1.9% this year in the euro zone, up from the 1.7% the
Commission estimated in May. Next year, it is expected to slow
to 1.4%.
The European Central Bank targets euro zone inflation of
just below 2%.
However, «inflation may turn out higher than forecast, if
supply constraints are more persistent and price pressures are
passed on to consumer prices more strongly,» the EU executive
warned. (Reporting by Francesco Guarascio @fraguarascio and
Marine Strauss; Editing by Toby Chopra)