Eurozone resilience unlikely to last on 'rocky start' to vaccines rollout

In Germany, robust exports helped Europe’s largest economy eke out 0.1% growth in the fourth quarter, staving off contraction

Fri, 29 Jan, 2021 - 17:53

Paul Carrel and Eamon Quinn

Growth in Germany and Spain and a smaller-than-expected contraction in France pointed to resilience in the eurozone economy in the final three months of last year, but the bright spot belies a more troubled outlook.

In Germany, robust exports helped Europe’s largest economy eke out 0.1% growth in the fourth quarter, staving off contraction despite a second wave of the new coronavirus slamming the brakes on consumption, new data showed.

France, the eurozone’s second-largest economy, shrank 1.3% in the final three months of 2020 after the country entered a second coronavirus lockdown in October to contain a second wave of infections.

Spain achieved timid quarterly growth of 0.4%. But that has not stopped Spain from recording its worst-ever annual economic contraction, with output falling 11% from 2019’s level, official data showed.

However, Capital Economics in London said that Europe's "rocky start" over the roll-out of vaccines and "more ominously" variations of the virus may delay the lifting of restrictions.

"Even if the variants found so far turn out to be manageable, the fact that the virus mutates more readily than had initially been anticipated adds to the case for caution in lifting restrictions, particularly on cross-border travel," Capital Economics said.

“Numbers for Germany, France, and Spain showed that GDP was relatively resilient in Q4,” said Nicola Nobile at Oxford Economics. But the analyst added, “there are not many indications that this dynamic could have continued in Q1”.