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Renewed lockdowns in Europe thwart growth – leading macroeconomic influencers

29 Mar 2021 (Last Updated March 29th, 2021 15:50)

Economists believe that renewal of Covid-19-related lockdowns across Europe dashed hopes of economic recovery in the region.

Renewed lockdowns in Europe thwart growth – leading macroeconomic influencers
Credit: Sue Rae Edmondson, Shutterstock.com.

Economists believe that renewal of Covid-19-related lockdowns across Europe, amid the third wave of the pandemic dashed hopes of economic recovery in the region.

Yannis Koutsomitis

Yannis Koutsomitis, a European affairs analyst, shared an article on how the reimposition of lockdowns across Europe amid resurgence of Covid-19, are quashing hopes of economic recovery.

The mass vaccination drive in the region was expected to control the damage caused by the pandemic and increase spending among consumers, but the third wave of the pandemic disrupted the plans.

French President Emmanuel Macron said that European Union (EU) will have to enhance its €750bn ($885bn) coronavirus recovery fund in view of the third wave.

The EU is seven weeks behind its target of inoculating 70% of its population with the vaccine against coronavirus by summer-end, which could cause losses of €123bn ($145bn) to the 27 nations belonging to the bloc.

European Central Bank chief Christine Lagarde recently hinting at an economic recovery in the second half of 2021, while Dutch bank ING revised the eurozone’s growth projection to 3% in 2021, reducing it marginally from its previous estimate.

Economist Andrew Kenningham; however, noted that economic activity in the EU will not bounce back to pre-Covid-19 levels until second half of next year.

Greg Ip

Greg Ip, chief economics commentator for The Wall Street Journal, shared an article on how the Covid-19 pandemic is forcing people in the US into early retirement and jeopardising economic growth.

The labour force participation rate for citizens aged 55 and older declined to 38.3% in February, compared with 40.3% in the same period in 2020, representing a loss of 1.45 million people from the labour market. The participation rate of workers in the 25-54 age group dropped, before bouncing back 1.3 points in February.

Economist Lydia Boussours attributed the exit of older workers from the force to the unprecedented health risks they face during the pandemic, as health authorities cautioned about geriatrics being more vulnerable to Covid-19 related health risks. These factors could result in most of the retired workers not returning to the force even after the Covid-19 pandemic ends.

The percentage of working age population that was not part of the workforce due to retirement increased from 19.3% in Q4 2020 compared to 18.5% in Q4 2019, the article highlighted.

Lawrence Lepard

Lawrence Lepard, an investment manager, shared an article about more than two-thirds of Americans being anxious about the rising inflation, owing to the US government and Federal Reserve’s response to the coronavirus pandemic-induced slump. The US government and the Federal Reserve pumped in trillions of dollars to save the economy from the pandemic-induced crisis, which triggered a price rise of financial assets and items in the real economy in the past 12 months.

As the Fed is ignoring the surge in prices, consumers are bearing the brunt of the situation, with 77% of the respondents in a survey expressing concerns about inflation. More than half of the people concerned about inflation belonged to the 18-24 age group, while those aged 55 and above were the least concerned, according to survey. Inflation has proved to be a major issue especially for millions of working-class Americans surviving on pandemic insurance cheques.

Inflation related worries are the highest in the 21st century as the spread between five- and ten-year breakevens hit the highest in almost two decades, as per the survey. Experts believe that the government and Fed’s stimulus funding is burdening the economy and could also expand inflation further. The Fed; however, continues to maintain that inflation is under control and that the current situation is not a repetition of the stagflation witnessed in the 1970s.