Variable delta spread overshadows economic recovery in Europe

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Variable delta spread overshadows economic recovery in Europe

The rapid spread of the coronavirus variant in the Delta is causing economists to worry that the bright economic outlook for Europe could be undermined by rising infection levels and the reimposition of travel and social restrictions.

The lifting of most lockdown measures across the region in recent months has led to this Height in business activity, retail spending and household confidence, leading many economists to upgrade their forecasts for European growth.

However, these assumptions are now being questioned that they have become highly contagious delta variable It already represents the majority of new cases in many European countries and is driving infection rates to their highest level in months.

“I’m a bit more nervous about the prospect of Delta derailing,” said Eric Nielsen, chief economist at UniCredit, which has raised its eurozone growth forecast for this year from 4 to 4.5 per cent. “It has to get really bad before we get another closure, but the navigation data from Google shows that it’s not the closures that drive the behavior, but the voluntary restriction.”

On Friday, Germany and France warned their citizens against traveling to Spain, as the rate of infection with the Corona virus exceeded Portugal to become the above in mainland Europe, dealing a blow to the tourism sector at the start of the crucial summer season.

Pablo Hernandez de Cos, Governor of the Bank of Spain, said his forecast for strong growth “is based on the assumption that the health crisis will end after the summer” and that Spain’s tourism sector will generate half of its pre-pandemic income this summer. , compared to last year. He warned that there remains “uncertainty surrounding the emergence of new variants of Covid-19 and the containment measures these may require”.

The Netherlands said on Friday it would reinstate the restrictions In restaurants, bars, cafes, nightclubs and live events – just two weeks after it was lifted – due to a more than tenfold increase in the country’s daily infection rate to nearly 7,000 in that period.

Cyprus also reintroduced rules on the number of people allowed in hospitality and leisure venues last week after the daily coronavirus infection rate hit its highest level for the year. Meanwhile, Portugal said vacationers must be vaccinated, tested negative or recover from the virus to stay in its hotels or eat inside restaurants in many areas.

European Center for Disease Prevention and Control He said On Friday, the weekly Covid-19 infection rate in the European Union and the European Economic Area rose to 51.6 per 100,000 people, compared to 38.6 the previous week, while hospitalization and death rates were stable. It expected the infection rate to exceed 90 per 100,000 people in four weeks.

“There are reasons to be concerned, as the risks are there and there appears to be negative momentum,” said Karsten Brzeski, head of macro research at ING.

Last week, the European Commission raised her expectations European Union growth in 2021 to 4.8 per cent, after a record contraction of 6.2 per cent last year. His forecast would be the fastest expansion seen since 1976 and would mean that the EU economy has regained its pre-pandemic level of production by the end of this year.

The EU Economics Commissioner Paolo Gentiloni said the EU forecast does not take into account the possibility of a new wave caused by the delta variable, but that this presents a “downside risk”. He played down the likelihood of new lockdowns, saying: “We don’t see a tendency toward new restrictions…we see a trend toward easing restrictions in important countries.”

Some economists take comfort from the fact that most delta infections have been among young people who are less likely to become seriously ill. Hospitalizations and deaths from the virus remain very low, while more than 44 per cent of adults in the European Union are fully vaccinated.

“Thanks to rapid advances in vaccination, we continue to consider it unlikely that countries will again have to impose serious restrictions on economic activity to contain medical risks,” said Calum Pickering, an economist at Berenberg.

The Spanish government argues that hospitalization rates remain low – with Covid patients occupying only 2.6 per cent of beds compared to 2 per cent a week ago – and that the infection rate is less significant than the increasing proportion of people fully vaccinated.

Additional reporting by Daniel Dombey in Madrid and Sam Fleming in Brussels

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