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Euro zone enters second recession; vaccination and ease of restrictions gives recovery hopes

DUBLIN: Economists say the euro zone economy has not recovered from the recession that hit the first quarter of this year. However, the European Union’s statistics office Eurostat hopes that the enhanced vaccination and the removal of pandemic restrictions will lead to economic recovery. Experts say the second technical recession is still going on.

Gross domestic product (GDP) in the 19 euro countries, including Ireland, fell 0.6% to 1.8% in the quarter. The euro zone is facing its second technical recession in 12 months. In the eurozone, economists expect a quarterly decline of 0.8%and an annual decline of 2.0%.

However, the euro economy is poised for a comeback, said Bert Colijn, euro zone economist at ING bank. It is expected that the manufacturing sectors will be active as the economies reopen. “Domestic demand is set for a strong rebound when economies reopen and the manufacturing recovery seems to only be limited by its own supply at the moment,” he said.

Germany’s (euro zone’s largest economy) 1.7% decline was the main reason for the contraction in the first quarter. The pandemic lockdown, which has been in place since November, has affected private consumption.

The contraction was mitigated by 0.4% quarterly growth in France, the second-largest economy, as consumer spending and business investment continued to rise amid coronavirus restrictions. The country is facing its third national lockdown since the end of March.

According to Eurostat, consumer prices in the eurozone increased 0.6% month on month in April, for a 1.6% year on year gain. Prices increased by 0.5% month on month and for a 0.8 per cent year-on-year rise, a decrease from the previous month’s 1.0% year on year increase.

Experts also said that the unemployment rate in the euro zone fell to 8.1% in March from 8.2% in February.

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