Euro area outlook: It’ll get worse before it gets better again

The euro area economy r ecorded very strong growth during the third quarter, recovering most of the activity lost in the second quarter . Early indicators had pointed to continuing growth during the final quarter of this year. Alas, rising infections and new containment measures have put the recovery to a temporary halt . The current containment measures are less stringent compared with March/April and their economic impact will be consequently less severe. Nonetheless, we expect the euro area economy to contract by around 4%qoq in Q4. We envisage containment measures to be softened again significantly at the beginning of next year. This, together with strong fiscal and monetary support and a favourable external environment, will put the economy back on its recovery path. Overall, we expect the euro area to grow by 5.7% next year after -7.5% in 2020.