MADRID – The economies in Spain and Italy are set to recover at their fastest pace this year since the 1970s. The strong economic growth will help countries overcome last year’s deep recession.
Spain’s gross domestic product (GDP) will grow by 6.2% in 2021, while Italy will record a growth of 5.6%. This is according to a Bloomberg survey of economists published Monday. Furthermore, this is an increase of 0.3 and 0.6 percentage points respectively compared to a survey published in July. The positive outlook for both countries is mainly due to the recovery of tourism in the southern countries.
Southern European economic growth outlook
Bloomberg writes that the improving growth economic outlook shows how Southern Europe can turn the page. Even after years of being associated with debt crises and economic malaise. This is especially crucial for Italy. The country wants to reduce a huge debt burden. But some fear it could eventually pose an existential threat to the eurozone.
Moreover, the two economies suffered the most in the region last year. Strict lockdowns wreaked havoc on businesses and the important tourism industry. Therefore, the recovery is fuelled in part by the easing of lockdowns. And also the multi-billion dollar investment as part of the European Union’s historic recovery fund.
Recovery dependent on pandemic evolution
“Yet the outlook remains highly dependent on the evolution of the pandemic,” Nicola Nobile of Oxford Economics told Bloomberg. “The spread of the delta variant is likely to trigger a wave of Covid cases, but vaccine progress means new waves should be significantly less lethal than the previous ones,” he wrote in a report.
Another concern is whether Spain and Italy will efficiently channel funds into projects that will improve medium-term growth prospects, given their poor track record in spending EU funds.
Bleak outlook for Germany
The brighter forecasts contrast with the more bleak outlook for Germany, Europe’s largest economy. Economists polled by Bloomberg lowered their August forecasts for the country’s annual GDP growth this year by 0.2 percentage points to 3.2%.
The entire euro area is expected to grow by 4.7% in 2021 and by 4.4% next year.
