Filenews 8 July 2021 - by Chrysanthos Manolis
While the European Commission considers, in the context of revised summer forecasts published yesterday, that 'opening up the economy to EU countries gives impetus to recovery', it is not clear to what extent Brussels has calculated the current deterioration of the epidemiological picture in Countries of the Union, particularly in the south, but also the disprove, so far , expectations of a significant recovery in tourism in countries where this sector of activity makes a strong contribution to GDP.
Typical is the case of Cyprus, whose authorities expected that during the summer quarter and the first two months of autumn there would be a significant increase in visitor arrivals, compared to those in 2020, so that, if anything, it would not be necessary to continue state support for enterprises in the wider tourism sector and to reduce unemployment. These hopes were not confirmed, as the United Kingdom did not include Cyprus in the green category, keeping the arrivals and stays of Britons in Cyprus very low, while in the development the epidemiological picture in Cyprus deteriorated, with the result that the country joined the red category a few days ago and made it even less attractive to European visitors, but also visitors from third countries.
In its summer forecast for Cyprus, the EU estimates that real GDP growth is expected to reach 4.3% in 2021 (the average projected growth in EU countries is 4.8%), slightly higher than forecast in the spring, attributed to a better-than-expected return in economic activity in the first quarter of the year and "a significant improvement in the economic climate in June". in 2021 the growth rate was 2%, compared to the last quarter of 2020, in which an overall recession of 5.1% was recorded.
The Commission's report also states that... the accelerated vaccination rate and the improved epidemiological situation in Cyprus have caused a significant relaxation of restrictive measures, creating the ground for continued growth in the coming months.
What is not included in the Commission's assessment is the deterioration of the epidemiological picture in July, which continues and it is difficult to assess its outcome and its impact on economic activity. The report, however, points out that the tourism sector is only expected to recover gradually, as uncertainty persists and international travel, particularly from the UK - the largest market for Cyprus - has not yet fully recovered. In fact, we are no longer talking about a partial recovery, at least, but about the possibility that arrivals from the UK will remain close to last year's tragic levels.
According to the summer forecast, for 2022 Cyprus' real GDP is projected to grow by 3.8%, with the average projected growth in EU countries being 4.5%.
Inflation is reported to be positive in the first five months of 2021, after falling 1.1% in 2020. Inflation is projected to rise to 1.4% in 2021 and stabilise at 1.3% in 2022.
Good forecasts against the backdrop of great uncertainty
The forecasts are only forecasts, provided that the EU itself points out that there is a great deal of uncertainty as to the management of the pandemic. However, the table of GDP growth forecasts can point out the following:
- The GDP of all EU countries is estimated to grow by the end of 2021 by an average of 4.8%, while for 2022 it is estimated at 4.5%.
- The largest growth rate in 2021 is projected for Romania (7.4%) and Romania (7.4%). followed by Ireland with 7.2%, Hungary with 6.3% and Spain with 6.2%.
- The lowest growth rates in 2021 are expected in Finland (2.7%), Denmark (3%) and Denmark (3%). these countries had one of the lowest recession rates in 2020 (below -3% Finland and Denmark and -3.7% in the Netherlands).
- For 2020, Spain (-10.8%), Italy (-8.9%), Greece (-8.2%) recorded the largest recession. Cyprus was below the European recession average (6%). and closed 2020 with -5.1%.
- For 2022, Spain is estimated to have the highest recovery rate (6.3%), followed by Greece (6%), Latvia (6%), Croatia (5.9%) and The Republic of Spain (5.9%). Malta (5.8%).
- The lowest growth rate for 2022 is estimated to be Finland (2.9%), Luxembourg (3.3%), Greece (3.3%) and The Netherlands (3.3%). Denmark (3.4%).
- Cyprus is projected to have growth of 3.8% in 2022, with the EU average estimated at 4.5%.
The recovery in the first quarter exceeded expectations
According to the general bulletin published by the European Commission on its summer forecasts "the European economy is projected to recover faster than previously expected, as activity in the first quarter of the year exceeded expectations and an improvement in the health situation led to a faster relaxation of restrictions on pandemic control in the second quarter".
More measured and cautious appeared the Commissioner for Economic Affairs Paolo Gentiloni, who, in response to a question specifically about the positive forecasts for the Greek economy, said that "the confirmation in practice of forecasts for the Greek economy depends to a large extent on trends in tourism and the course of the pandemic. The message," he added, "is vaccination, vaccination, vaccination. But we are of course looking at what we call a negative risk to our predictions, the possibility of changing the pandemic situation."
According to the 2021 summer interim economic forecast, the EU and euro area economy is expected to grow by 4.8% this year and by 4.5% in 2022. Compared to previous spring forecasts, growth in 2021 is higher in the EU (+0.6 percentage points) and the euro area (+0.5cm), while for 2022 it is higher in both cases for +0.1 percentage points. Real GDP is projected to return to pre-crisis levels in the last quarter of 2021 in both the EU and the euro area.
