Europe will recover from the coronavirus-induced crisis three times faster than after the global financial crash of 2008, according to analysts at Morgan Stanley.
The region is grappling with a second wave of infections and a subsequent new round of lockdowns and social restrictions. These are fueling another slump in economic activity, but Morgan Stanley expects a “strong rebound” in 2021.
“In spring 2021, assuming wide availability of an effective vaccine, we see pent-up demand and higher savings fuelling a strong rebound, in an echo of 3Q20,” analysts at the bank said in its latest European economic outlook.
Gross domestic product (GDP) sank by more than 11% in euro zone in the second quarter of 2020, when the first lockdowns were implemented. However, it then jumped by more than 12% in the third quarter, alongside a period when lockdowns were lifted.
The bank believes that consumers’ willingness to spend, and a high level of savings, will help the economic recovery, coupled by continued fiscal and monetary support.
“This initial surge turns into a sustained robust expansion, backed by ongoing policy support,” Morgan Stanley said.
The European Central Bank stepped up its purchases of government bonds in the wake of the pandemic, lowered borrowing costs for banks and kept interest rates at record lows. The central bank is expected to announce further stimulus next month.
In addition, governments across Europe have also increased their support, including the implementation of job-retention schemes.
