European Union Economy Projected to Recover Faster Than Expected

Nineteen countries in the eurozone are expected to grow 4.8 percent in 2021, half a percentage point more than previously forecast.

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European Commission sees the economy recovering faster than expected.

Shoppers in Amsterdam last month. The European Commission said consumer spending would quicken as people get back to work, though the spread of new variants remains a risk.Credit…Remko De Waal/EPA, via Shutterstock

July 7, 2021, 6:47 a.m. ET

The European Commission said Wednesday that successful vaccination drives and government stimulus will allow the eurozone economy to make up the ground lost because of the pandemic by the end of the year, instead of early next year as previously forecast.

The commission, the European Union’s administrative arm, said in its official summer forecast that the 19 countries in the eurozone will grow 4.8 percent in 2021, half a percentage point more than previously forecast.

The European Union, which includes the eurozone plus eight additional countries, will also grow 4.8 percent this year, compared with an earlier forecast of 4.2 percent, the commission said.

“The European economy is making a strong comeback with all the right pieces falling into place,” Valdis Dombrovskis, executive vice president of the commission, said in a statement.

Consumer spending will pick up as people get back to work, while businesses will invest in expansion, the commission said, though it warned that the spread of new variants remains a risk.

Annual inflation in 2021 will average 1.9 percent in the eurozone, the commission forecast, because of strong demand and shortages of some goods. For most of 2019 and 2020, inflation in the eurozone was below 1 percent.

If the forecast is accurate, inflation will approach the European Central Bank’s official target. But the central bank is unlikely to begin withdrawing stimulus to the eurozone economy until there is more evidence that the bloc has fully recovered from the effects of the pandemic.

“We will have to keep a close eye on rising inflation, which is due not least to stronger domestic and foreign demand,” Mr. Dombrovskis said.

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