FX.co ★ Economists make doom and gloom predictions for European economy

As it is usually the case in real life, miracles rarely happen. Therefore, those economists who were betting on a miracle for the eurozone economy had to face the brutal reality. According to the vast majority of forecasts, Europe is bracing for an imminent economic downturn in 2021. Besides, they do not see any factors that may somehow brighten the gloomy picture.

Leading analysts are projecting the economic indicators to lose about 4% in the first three months of 2021. Such financial companies as JPMorgan and UBS Group AG have even downgraded their already grim forecasts for the bloc’s economy. The only ray of sunshine in this kingdom of darkness is that the euro area has been long prepared for such a decline. The pandemic and subsequent lockdowns have seriously hurt the economy. So, few now have illusions about quick and steady economic recovery. Thus, economists did not take aback by a fall in the economic indicators.

Besides, the spread of the coronavirus pandemic, as well as new quarantine restrictions, remain the main threat to the European economy. In addition, the EU may experience difficulties with the distribution of vaccines and disruptions in trade due to Brexit. If so, the European authorities will be forced to adopt news stimulus packages. "We expect governments to provide ongoing support to assist the recovery, with a shift from income support to demand stimulus," UBS economist Reinhard Cluse pointed out. “Ongoing monetary policy support throughout 2021 and into 2022 seems assured."

The President of the ECB, Christine Lagarde, has already proposed to make the European Recovery Fund a permanent tool, although initially, it was a temporary one. EU leaders created this fund to help EU countries get out of the crisis. However, the crisis is about to come.