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Europe's Recovery: Recalibration and Reallocation - Regional Economic Outlook Europe

Europe's Recovery: Recalibration and Reallocation

An increasingly resilient recovery is taking hold in Europe, buttressed by gradual increases in vaccination rates and mobility. The Regional Economic Outlook for Europe now forecasts 5.2 percent growth for advanced economies and 6 percent for emerging economies in 2021.

Strongly accommodative macroeconomic policies and COVID-19 support schemes have paved the way for the recovery. However, uncertainty remains elevated due to risks of new infection waves and virus variants amid uneven vaccination rates across countries. It is therefore imperative to continue increasing vaccinations and to strongly support international efforts to speed up vaccine access globally.

Downside risks: For 2022 growth is projected at 4.4 percent in advanced European economies and 3.6 percent in emerging European economies. However, risks are tilted to the downside owing to potential virus mutations, prolonged supply disruptions, and high energy prices among others.

Moving forward, Europe faces two major post-pandemic policy challenges: controlling inflation and dialing back fiscal support. 

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