Covid Delta variant threatens Europe’s economic rebound — Economists

The spread of the Covid-19 Delta variant threatens Europe’s nascent economic rebound, economists told the Financial Times on Sunday.

The European Centre for Disease Prevention and Control said on Friday that the weekly Covid-19 infection rate for the EU and European Economic Area had risen to 51.6 per 100,000 people, up from 38.6 the previous week, while the hospitalisation and death rates were stable. It forecast the infection rate would exceed 90 per 100,000 people in four weeks, the report said.

“There are reasons to be concerned, as the risks are there and there seems to be negative momentum,” said Carsten Brzeski, head of macro research at ING.

Last week, the European Commission raised its forecasts for EU growth in 2021 to 4.8 per cent, after a record contraction of 6.2 per cent last year.

“I’m a bit more nervous that recovery could get derailed by Delta,” said Erik Nielsen, chief economist at UniCredit, which has raised its eurozone growth forecast for this year from 4 to 4.5 per cent. “It has to get quite bad before we get another lockdown, but Google mobility data shows that it is not so much the lockdowns that drive behaviour but voluntary restraint.”

Paolo Gentiloni, the EU’s economics commissioner, was cited in the FT report, saying that the EU’s forecasts did not factor in the prospect of a new wave triggered by the Delta variant, but this was a “downside risk”. He played down the likelihood of fresh lockdowns, saying: “We don’t see a tendency towards new restrictions . . . we see a tendency towards easing restrictions in important countries.”

Some economists take comfort from the fact that most Delta infections have been among younger people who are less likely to fall seriously ill. Hospitalisations and deaths from the virus remain very low, while more than 44 per cent of EU adults are fully vaccinated, the report said.