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02 Feb 2021 | 11:42

Lockdown measures cause Eurozone GDP to falter

(Sharecast News) - Activity in the Eurozone economy eased in the last three months of 2020, official data showed on Tuesday, after countries introduced fresh lockdown measures. But unexpected growth in Germany and Spain helped to limit the damage a tad.

According to Eurostat, the European Commission's statistics office, seasonally-adjusted GDP decreased by 0.7% in the Eurozone when compared with the prior three months and by 0.5% across the wider European Union. Year-on-year, GDP fell 5.1% and 4.8%, respectively.

The 'flash' estimate for the fourth-quarter follows a rebound in growth of 12.4% in the Eurozone and 11.5% across all members in the third quarter.

Economists had been expecting a sharper fourth-quarter contraction, of around 0.9%.

Eurostat's first estimate for 2020 as a whole was a decline of 6.8% in the Eurozone and 6.4% in the wider bloc.

Bert Colijn, senior economist, Eurozone, at ING, said: "Restrictive measures have been adapted and have become milder compared to the first wave. Think of countries like France and Spain, where industry and construction have remained largely open over the course of the quarter. That has had a very positive effect on GDP.

"What also helps is that the rest of the world is still open. Outside the Eurozone, most economies have remained largely open and the fourth quarter benefited from strong demand from countries like China, and from a stockpiling effect in the UK head of the end of the transition period."

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: "The headline is better than the consensus expected up until very recently, not to mention relative to the European Central Bank's assumption of a 2.2% decline in its December forecasts.

"A smaller-than-expected hit in the fourth quarter is great news, though we suspect that this upside surprise will be at the expense of a fall in first quarter GDP. In other words, we now think the Eurozone is in a double-dip recession. We are confident that the recovery will start in the second quarter, but we now think it will be a lot slower to begin, due to the slower-than-expected vaccination effort."

In a note, Rabobank said: "This apparent resilience of the economy, very much reinforced by government support measures, bodes some comfort.

"That said, the third wave and accompanying containment measures likely will lead to another GDP contraction in the first quarter. Moreover, new mutations, a slow vaccination trajectory and resurfacing supply chain issues could hamper the recovery for some time longer."
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