Bank of Spain, European Commission Raise GDP Estimate for Eurozone
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Bank of Spain, European Commission Raise GDP Estimate for Eurozone

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Azeez Mustapha

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Bank of Spain says Spain may grow more than expected in 2022 due to a delayed increase in EU recovery funds. Presenting the European Economic Outlook for Spring 2021, Eric Manner, Chief Spokesperson for the EU Commission, said that “after a long winter, Spring #ECforecast is showing positive news on growth prospects”.

The forecast for GDP growth in the eurozone for 2021 has been raised to 4.3% from 3.8% earlier. The forecast for GDP growth in the eurozone for 2022 has been raised to 4.4% from 3.8% earlier. Inflation in the Eurozone in 2021 will be 1.7%. Inflation in the Eurozone in 2022 will be 1.3%. The size of the eurozone economy will reach pre-virus levels in the fourth quarter earlier than expected.

Expects all EU economies to return to pre-viral GDP levels by the end of 2022. The upward revision is mainly related to national recovery plans. Risks to the outlook remain high and generally balanced. The euro/dollar pair has moved sharply due to the revision of the EU growth forecast upward but retained the recovery mode at 1.2106, where it is now fluctuating.

European Central Bank (ECB) director Yannis Stournaras noted on Thursday that markets are showing rising inflation expectations, but added that concerns about inflation in Europe are not the same as in the US. “Both fiscal and monetary policies in Europe are in the right mix,” Stournaras said.

Bank of Spain Forecasts Stronger Economic Development

This was announced by the Governor of the Bank of Spain and the European Central Bank (ECB) Pablo Hernandez de Cos in an annual report released on Thursday. Expects economic recovery in the second half of 2021, although the effects of COVID-19 will last for years.

Spain’s recovery depends on the pace of vaccinations, the implementation of EU recovery funds, and reforms. Restoring tourism, private consumption and efficient layoff schemes are key to a still-fragile economy.

A ‘very flexible’ monetary policy will be required in the coming quarters due to the fragile recovery of the EU economy. PEPP purchases should be adjusted if the rise in interest rates is not accompanied by a return to mid-term inflation.

Calls for dual fiscal authorities at the national and European levels. The national authority must focus on debt sustainability, while the EU authorities must respond to subsequent events. EUR/USD is holding a bounce above 1.2050 based on the comments above, trading modestly throughout the day.

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