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February 1, 2022

Macro view: Eurozone stays strong despite Covid surge

The eurozone economy grew 0.3% in the last three months of 2021, highlighting its increased resilience against record Covid cases and Germany’s contraction, say economists.

Linda Yueh

Linda Yueh, economist, an adjunct professor of economics at the London Business School, and a fellow in economics at Oxford University, shared an article on the eurozone and European Union (EU) reporting a growth of 0.3% in the fourth quarter of 2021 despite a Covid surge and Germany shrinking to a 0.7%.

Economists stated that growth in the 19-country bloc in the last three months of 2021 slowed from 2.2% in the previous quarter and was in line with their expectations as the Omicron wave took hold over the region from late November. However, Eurostat stated that its first estimate of annual GDP was that it grew by 5.2% in both the eurozone and the EU in 2021.

The eurozone economy showed durability despite surging infections across regions, and Germany’s contraction having been offset by robust growth in France, Italy, and Spain. Despite tightening restrictions to curb the recent wave of Covid-19 infections, the overall economic activity has been smoother than in the previous waves, opine experts.

The lacklustre performance of Germany, caused by a drop in consumer spending and supply chain disruptions in manufacturing, left the economy 1.5% below its pre-pandemic GDP levels in the fourth quarter, while France was 0.9% and the US was 3.1% above their pre-Covid GDP levels respectively.

Arvind Virmani

Arvind Virmani, economist and former chief economic advisor to the Government of India, tweeted about the free food under the National Food Security Act (NFSA) of India being the most important and effective measure in offsetting the income effects of the Covid-19 pandemic. He stated that the precise estimates are expected in a couple of weeks, while reiterating that GDP is a sum of wages and profits or aggregate income.

Virmani retweets Economic Survey details shared by Rajeev Mantri, the founder and managing director of India-focused venture capital firm Navam Capital, which highlights all the welfare measures adopted by the government during the Covid crisis, along with the results thereof.

One of the key safety net measures to prevent distress during Covid was the Pradhan Mantri Garib Kalyan Anna Yojana, the survey revealed. The programme offers an additional free-of-cost food grains to 80 crore NFSA beneficiaries at the rate of five kilogram per person per month, over and above the regular monthly NFSA food grains.

Introduced during the start of the pandemic in March 2020, the relief measure has been extended until March 2022 under phase V. Between March 2020 and November 2021, 600 lakh metric tonnes (LMT) of food grains were allocated to states and union territories that amounted to ₹2.07 lakh crore in food subsidy.

Jim Stanford

Jim Stanford, economist and director at Centre for Future Work and an honorary professor of political economy at the University of Sydney, retweeted the Committee for Economic Development of Australia’s (CEDA) views on senior economist Alison Pennington’s comments on child care and others, when she mentioned that while talking about labour market challenges during the Covid-19 pandemic, it was important to acknowledge the failure of this decade-long experiment of government-funded arms-length private social services. Therefore, there was something wrong with the model.

Pennington emphasised that if there were lots of available jobs as economies reopened after the initial and severe pandemic waves, it was important to dig deeper into these jobs and more significantly, understand the quality of the jobs. She believes that employers have become very comfortable with very high levels of underutilisation, and being able to remove anyone with the right skills.

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