Restrictions on movement to contain a surge in new coronavirus cases across the EU are expected to have a milder impact on growth than during previous waves because they target a smaller section of the population: the unvaccinated.
Last winter, the eurozone was plunged back into recession when output contracted for two consecutive quarters after a wave of infections prompted authorities to reimpose strict rules limiting people’s movement.
In recent weeks, Covid-19 cases in Europe have risen to their highest 14-day rolling average for nine months and in some countries — including Germany, Austria and the Netherlands — have hit record levels. This has cast doubts over the region’s economic recovery.
But economists say a return to strict lockdowns is unlikely now that almost two-thirds of the EU population has been fully vaccinated, which has meant death rates and intensive care occupancy levels have not increased at the same rate as infections.
By focusing many of the latest restrictions on unvaccinated people, they believe authorities can avoid crippling the economy again, while also encouraging those who are hesitant to finally get the jab. On Sunday, Alexander Schallenberg, Austria’s chancellor, confirmed that the federal government was imposing a nationwide lockdown on those who have not been jabbed, effective from Monday, adding: “We must raise the vaccination rate. It is shamefully low.”
Katharina Utermöhl, economist at Allianz, said of the likely economic impact of the new Covid-19 wave on Europe’s economy: “At this stage we expect a dent in consumption but not a derailment.
“It will be a terrible year again for [in-store] Christmas retail sales, but a lot of that will move online and we think restaurants, travel and accommodation will continue to do better.”
Shops, eateries and leisure venues have experienced a fall in customers since the latest Covid-19 surge. Footfall in eurozone retail and recreation recently fell back below pre-pandemic levels, while remaining well above the last winter’s lows, according to Google Mobility data.
This has contributed to an overall downgrading of short-term growth expectations for the eurozone economy in the final months of 2021. But most economists predict the economy will slow rather than contract. The European Commission last week forecast eurozone growth would dip from 2.3 per cent in the third quarter to 0.8 per cent in the final quarter.
Economists believe the main causes of the slowdown are the supply chain bottlenecks that are throttling manufacturing output and a sharp rise in inflation that is eroding people’s disposable income. Eurozone inflation hit a 13-year high of 4.1 per cent in October.
“I don’t think restaurants will be half-empty again, as the virus is only going to have a modest impact,” said Holger Schmieding, chief economist at Berenberg. “The biggest downside risk to growth is the supply chain.”
He said the surge in new virus cases — and rules being introduced in some countries restricting unvaccinated people’s access to many venues and activities — could have a “self-correcting” effect by encouraging more people to get inoculated.
Parts of Austria and Germany have limited access to restaurants, gyms, cinemas and sports arenas to people who have been vaccinated or who have immunity after recovering from the virus — excluding those with a recent negative test who had previously been granted access.
The Netherlands plans to adopt a similar “2G regime” after a three-week limited lockdown in which many public events and leisure venues are forced to close and restaurants and non-essential shops are made to shut by early evening.
“Tonight we are bringing a very unpleasant message with very unpleasant and far-reaching measures,” said Mark Rutte, the Dutch prime minister, on Friday. “The virus is everywhere again, and must therefore be fought everywhere.”
Austria’s Schallenberg said the restrictions meant that the third of the country’s population who had held out against being inoculated could expect Christmas to be “uncomfortable”. “I don’t see why two-thirds of the population should lose their freedom because another third hesitates,” he added.
After new coronavirus cases in Europe hit a record high of 2m last week, German chancellor Angela Merkel said she was “very worried” and urged the third of Germany’s population who had not been vaccinated to “think again”. Merkel and regional leaders will discuss potential nationwide measures to tackle the virus on Thursday.
In France, coronavirus cases jumped 40 per cent last week — described as a “warning sign” by President Emmanuel Macron. But Anne-Sophie Alsif, chief economist at the BDO France consultancy, said the recovery would “stay very strong this year and in 2022 because household consumption remains so high, and investment and exports are doing well”.
Denmark, which in September became one of the first EU countries to lift all coronavirus curbs, on Friday reintroduced its Covid-19 passport for entry to many indoor spaces and events.
But Helge Pedersen, chief economist at Nordea, said he did not expect this would have a “big impact” because most of the population was vaccinated and Denmark had a large testing capacity.
Christian Fürtjes, economist at HSBC, said a recent stabilisation of infection numbers at high levels in the UK, where the latest wave of the virus started earlier than in most of Europe, suggested a similar stabilisation could occur in the continent soon.
“If that happens then most governments will be very cautious about reimposing strict lockdowns, because they fear the harsh economic impact and they know most people are sick of these restrictions.” .
Additional reporting by Richard Milne in Oslo, Eir Nolsoe in Paris and Sam Jones in Zurich
Source: Economy - ft.com
