FX.co ★ Eurozone economy faces double recession

Analysts at JPMorgan Chase & Co. believe that the eurozone economy may plunge into recession again amid new lockdowns due to coronavirus infection. In addition, there are fears that a new strain of the virus sweeping through the UK will lead to devastating consequences.

Moreover, vaccine delays and trade disruptions due to Brexit only make things worse. It is likely that the decline in the UK GDP will continue in the second quarter of 2021. In other words, the economy could repeat the recession of early 2020, but perhaps it will be less severe.

Economists note that economic activity in the eurozone has increased, but remains much lower than a year ago. Quarantines and the slow distribution of vaccines are not helping, and prolonged restrictions have become a serious problem.

Previously, analysts predicted the growth of the eurozone economy by 1.3%, and now they assume a fall of 4%, taking into account the forecasts for the duration of restrictions.

According to JPMorgan, the economy contracted by as much as 9% in the fourth quarter of 2020. On this basis, the company is forecasting a 1% decline in the first quarter of this year, compared with the previous forecast of 2% growth.

Some analysts are confident that the economy will not return to pre-coronavirus levels until 2023.

Most economists say the recovery will begin in the second quarter of 2021. Once restrictions are eased and the death rate is reduced through vaccine proliferation, there can be a sharp rebound, at least initially.

There are fears that consumers will start spending their savings which may lead to a surge in inflation.

By the second half of the year, government actions should support economic growth. It is expected that 1.8 trillion euros ($2.2 trillion) will be allocated to support the EU economy.