The European economy is on track for faster-than-predicted growth, but given the uncertainty surrounding the COVID-19 ’'s Omicron variant, rising inflation and supply chain bottlenecks, the path to recovery remains unclear. Real Economy takes a look at the latest forecasts for the European economy for 2022 and beyond.
The European economy: The current appearance
GDP, both across the EU and in the eurozone region, is expected to reach 5 percent ’ by the end of 2021. That's just over the previous estimate of 4.8 percent’.
As we enter ’ in 2022, the economy is expected to grow by 4.3 percent. Then a more moderate rate of 2.5 percent for the EU and 2.4 percent for the eurozone for 2023. But this growth is unequal across the EU. But it all depends on how the COVID-19 pandemic develops. The rise in cases and the Omicron variant have shaken markets, and new government restrictions may affect economic activity; Businesses, on the other hand, are at risk of being affected by further shortages and supply chain disruption.
from Italy: Overcoming the pandemic
The Italian economy has a growth forecast of 6.2%, but it is feared that supply chain problems could jeopardize the economy's recovery. One of the companies facing such negativities is electric bicycle manufacturer Atala. The Lombardy-based company in the north of the country has seen a 60 percent increase in orders since the start of the COVID-19 crisis, but struggles to meet this demand as delivery times for components increase.
Massimo Panzeri, CEO of Atala’, said that “Production increased by an average of 36 percent in 2020’, and we need to see a growth of around 10 or 15 percent in 2021’. It could have been higher in 2021’, but the lack of components has reduced its expansion potential, ” says.
Investing in environmentally friendly transport is one of the top priorities of the European improvement plan. Atala hopes to take advantage of this by moving some of its activities from Turkey ’.
But as Massimo’ explains, this will not solve all supply chain problems.
“If we send the welding or dyeing processes back to our country, but aluminum rods or carbon fiber, materials for battery cells or steel not produced in the European ’ are missing, then we only take the problem elsewhere. So, in my opinion, we need to think at the political and European level; change cannot be limited to part of the supply chain; must start from the very beginning, i.e. from raw materials.”
Attracting the best talent
EuropeLike the rest of ’, a shortage of basic materials and goods has raised fears that inflation will accelerate in ’, Italy. The country invests more than any other EU country. A total of 235 billion euros over five years, including 191.5 billion from AB’'s bailout fund. Italy received its first 25 billion in August.
But it's not just a shortage of goods and supplies. Another problem that many businesses currently face is attracting and retaining skilled workers. Turin-based Argotec produces microsatellites for the space industry. One of its products, LICIACube, is currently in use on NASA’'s asteroid diversion project DART’.
David Avino, CEO of microsatellite manufacturer Argotec’in, says the Italian economy is experiencing a renaissance. The company aims to double its workforce.
To meet the growing demand, the company plans to double its workforce, but says more needs to be done to retain young talent.
Argotec CEO David Avino, ’As we can see from the statistics, analysis and forecasts, the economy, especially the Italian economy, is experiencing a kind of renaissance. In this case, the important thing is to think about the future and to think about the future means to invest. What we want to do with the government is have the capacity to bring back young people who have left the country to do research and development abroad for certain reasons, ” says.
Creating a more attractive business environment is one of the priorities of the European rescue plan, as well as green mobility, clean energy and digitalisation.
The Ghost of Inflation
The rapid reopening of the economy has led to supply chain bottlenecks. This and increases in energy prices drove inflation up. It was at -0.3 percent in the euro area at the end of 2020. This rate increased to 2.8% in the third quarter of 2021’.
More increases are expected in 2022’. Naomi Lloyd of Real Economy’ spoke with Laurence Boone, OECD’'s Chief Economist, to gain a global perspective on the economic outlook of Europe’.
Naomi Lloyd, euronews:
“We have seen a huge increase in the number of coronavirus cases. What does this mean for Europe’'s recovery?”
Laurence Boone, OECD:
“EuropeThe recovery in ’ continues well, but this clearly adds uncertainty to this outlook.”
Naomi Lloyd, euronews:
“How does this compare to the table you see globally on OECD’?”
“Europe's economies are doing quite well compared to all countries. It was very interesting to watch how different countries protect their own people in the European ’. What governments do is pay companies to keep people in their jobs. So when you reopen the economy, you immediately start working again. The situation in the US ’ is quite different. Governments send checks to households, so they cash the money, but they don't have a job anymore. So what we're observing right now is that employment has almost improved in the European ’, and the U.S. is still lagging behind in ’.
Naomi Lloyd, euronews:
“How worried are you about the new variant and its impact on the economy?”
Laurence Boone, OECD:
“, I think you can look at this in two ways. Either this delays the recovery a bit and increases the tension in the supply chain, or it is a more difficult variant, and this can indeed create a regression in the recovery and, if this happens, surprisingly, cause enough drops in prices.”
Naomi Lloyd, euronews:
“How worried are you about this current increase in inflation?”
Laurence Boone, OECD:
“If we resolve the state of health by summer and everything returns to normal, then we are quite sure that supply tensions will begin to decrease and inflation will gradually decrease. If we fail to control the state of health and tensions continue until 22, 23’e, then we will be more concerned that this inflationary pressure will last longer.”
Naomi Lloyd, euronews:
“Do we have a reason for Christmas cheer?”
Laurence Boone, OECD:
“Of course we have reasons for Christmas cheer. First of all, when you think about it, a year ago we were told that the vaccine was available in as little as nine months. It usually takes 10 years to get the vaccine. This crisis has managed to protect people and businesses as much as possible, and there has never been so much awareness of the climate problem. That's why I think we're on a good path. - ”
The author/producer: Naomi Lloyd
The reporter: Cyril Fourneris
The video editor: Silvia Lizardo
The producer is: Camille Cadet
The camera crew: Giampiero Gandolfo and Stefano Sala
From the Brussels: Pierre Holland and Eric Wathieu
Paris: Vincent Kelner and Nicolas Personne
Design of Motion: NEWIC https://www.agence-newic.com/
