Macroeconomic forecasts of major European and global institutions have yet to reflect the spread of the Delta variant of SARS-CoV-2. Their anticipated outlook for the global and European economy is thus slightly better than indicated in their previous forecasts. Some economists are warning that everything may turn out differently, according to the summary by Ozios. 

The latest economic forecast was presented by the European Commission on 7 July. As opposed to its spring forecast, it has slightly improved the economic outlook for the 27 EU Member States. The EU and euro area economies will grow 4.8 percent this year, which is about half a percentage point better outlook than in the May forecast. 

However, the Commission warns that a number of factors will be critical for the outlook. “They include the European Union’s ability to benefit from the improved external environment with continued adequate support from the economic policy and responses of households and firms,” writes the European Commission in its July document. 

In its April forecast, the International Monetary Fund anticipates global economic growth of 6 percent this year. Also the IMF has improved its outlook by half a percentage point compared to January. Advanced world economies are expected to improve their performance by 5.1 percent and developing economies by 6.7 percent. India will grow the most according to the IMF. Its gross domestic product is expected to increase by 12.5 percent. The Chinese economy will add 8.6 percent.

The Organisation for Economic Co-operation and Development (OECD) improved its global economic outlook for this year as well in May. Global economic growth is now expected to be 5.8 percent, which is 1.6 percentage point more than forecasted last December. 

However, all forecasts assume that vaccination of population will continue as planned and no emergencies will occur. Specifically, authors inform that their forecasts are subject to an increased degree of uncertainty relating to the progress or pace with which the coronavirus pandemic will subside. 

Experience from recent weeks indicates that global economic recovery may ultimately be slower than expected in the current forecasts. The reason is the spread of the Delta coronavirus variant that is much more infectious than, for example, the Alpha variant (originally the British mutation) or the original version of SARS-CoV-2.

But the last year’s scenario when most European countries underwent the second wave of the pandemic in the autumn and drastic measures had to be adopted having impacts on economy should not reoccur. Practically, the question is whether the growth of the global economy will be several tenths of a percentage point faster or slower. 

The reason is that the vaccination rate has been growing and the vaccine seems to effectively prevent covid hospitalisations even after the first dose of vaccine (in case of two-dose vaccines). Moreover, risk groups are expected to be re-vaccinated with another dose in autumn. 

Nevertheless, some countries want to adopt certain stricter anti-epidemic measures. The Netherlands introduces new restrictions relating to restaurants, cafes, bars and live mass events within two weeks from easing. Cyprus has a similar approach. Germany and France warn their people of travelling to Spain. 

“There are reasons to be cautious as the risk of a negative impact on recovery has been growing,” said Carsten Brzeski, Head of Macro of ING Research, for the British Financial Times. “I am a bit worried that Delta might slightly derail it,” said Erik Nielsen, Chief Economist at UniCredit, for the same newspaper. In his opinion, any potential other lockdown does not have to be devastating because according to Google mobility data, people confine their activities irrespective of the anti-epidemic measures being adopted or not. The Governor of the Bank of Spain, Pablo Hernández de Gos, constantly points out that so far, economic forecasts have anticipated that the health care crisis will be “over after the summer”.