The third wave of COVID-19 pandemic is forcing major European countries, including Germany, France, Italy to impose or extend lockdowns in March. A slow pace of vaccination and faster spreading variants of the virus have lead to a spike in infections, burdened healthcare systems and suppressed economic activities in Europe.
Germany extended its shut down until March 28 after the relaxation of lockdown in some states in the second week of March, while Italy imposed new restrictions on March 15 to slow the third wave. France was the latest country to impose a third lockdown in regions most affected by the virus.
Vaccination programs in Europe have been slow compared to the US and UK amid concerns raised about the side effects of the AstraZeneca vaccine. Inoculations have resumed in Germany and France after the EU regulator cleared the vaccine on Friday, but public resistance to the vaccine is hampering the drive. Other EU countries including Italy, Spain, Portugal, the Netherlands, Bulgaria, Lithuania, Slovenia and Latvia have also agreed to resume the AstraZeneca jab.
In Germany, the second wave of the pandemic disrupted economic recovery in Q1. With the progress of vaccination drive, the recovery is expected to continue at a faster pace, according to IfW Kiel report. Economic losses are more concentrated in retail and service industries, while export-related businesses continue to recover. Germany’s GDP is expected to growth at 3.7pc in 2021 and 4.8pc in 2022.
The third lockdown in France is expected to have a significant impact on economic activity and further deteriorate the country’s economic outlook for H1. After the second lockdown in November, Q1 is likely to be very weak. The new restrictions starting March 20 will further suppress economic activities and Q1 GDP growth is likely to be close to zero percent, according to ING report. In Q2, since these lockdowns will most likely last until mid-April, GDP growth is expected to be lower than earlier expectations but could be positive.
Euro area’s Q1 output is expected 5pc below pre-pandemic level, with considerable variations among member nations and different sectors, according to IfW Kiel report. A drop in consumption due to lockdowns indicates a GDP decline of about 1pc in Q1, but rapid vaccination drive and improving seasonal conditions could drive the economy to pre-pandemic levels in the next few quarters. Overall, GDP is likely to grow by 4.8pc in 2021 and 4.3pc in 2022. The pre-crisis level could be breached by the end of 2021.
Scrap yards in Europe are complaining of lower collection rates due to lockdown and other restrictions. Yard owners also spoke of a staff crunch to process scrap, leading to fewer offers and trades. While exporters cite tight supply, importers and traders are sceptical and believe suppliers are hoarding material due to avoid lower prices. Once prices rise, exporters will increase offers and offload scrap at higher prices, said Indian importers. They believe the recent blip in LME metal prices has turned supplier sentiment bearish.