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MAKER ECONOMY

What to expect from Europe’s economic recovery in 2021

A worker wears a protective mask after VW re-starts Europe's largest car factory after coronavirus shutdown in Wolfsburg, Germany, April 27, 2020, as the spread of the coronavirus disease (COVID-19) continues.
Reuters/Swen Pfoertner/Pool
After a year marred by infections and lockdowns, the Covid-19 vaccine rollout offers a path forward for Europe’s economy in 2021.
  • Annabelle Timsit
By Annabelle Timsit

Geopolitics reporter

The European economy will likely contract by 7% this year—its largest dip since World War II. That’s due to months of lockdowns imposed by governments eager to stop the spread of a virus that has killed close to 376,000 people in Europe in the last year.

While there’s no V-shaped recovery in sight, the IMF expects Europe to grow by around 4.7% next year, with much of the growth coming in the second half of 2021 as more people get vaccinated against Covid-19, travel restrictions soften, and grants and loans to fragile economies kick in from the EU’s €750 billion ($920 billion) recovery fund.

The assumption underlying many economic models “is that we will reach herd immunity in Europe by the end of 2021,” says Nadia Gharbi, senior economist at Pictet Wealth Management in Switzerland. “By the end of Q2, we expect [lockdown] measures to be almost all lifted.”

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