BENGALURU- The euro zone economy is in double-dip recession amid lockdown restrictions due to a resurgence in coronavirus cases, according to a Reuters poll of economists, who said the risks to their already weak outlook was skewed more to the downside.
Given delays to the European Union’s vaccine roll-out and concerns about new coronavirus variants supporting current lockdowns, stalled economic activity and rising unemployment pose a serious threat to any expected recovery.
Only last month the economy was predicted to make a sharp recovery and grow 0.6 percent this quarter after shrinking 0.7 percent in Q4.
But those views turned sour in the Feb. 8-11 poll of over 75 economists as a spike in COVID-19 cases necessitated renewed restrictions on economic and social activity.
The euro zone economy was forecast un the latest poll to contract 0.8 percent this quarter.
That was after GDP in the euro area contracted in the first two quarters of last year – making current expectations a double-dip recession.
Over three-quarters, or 28 of 36 economists responding to an additional question, said the risks to their growth outlook were skewed to the downside.
“With lockdowns extended into the new year, it really feels like it is darkest before dawn in the euro zone. In the first quarter, GDP is all but certain to contract again and the question is now by how much,” said Marcel Klok, senior economist at ING.
“The combination of lockdowns and vaccinations will allow for more substantial reopening of economies over the course of the second quarter. This will then also mark the start of the recovery of the euro zone economy.”
The economy was forecast to grow 2.1 percent in the second quarter compared with 2.3 percent predicted last month. It was then expected to expand 1.9 percent and 1.2 percent in Q3 and Q4, respectively, compared to 1.9 percent and 1.0 percent forecast in January.