Euro zone GDP falls less than expected at end of 2020

Eurozone on brink of double-dip recession

The eurozone economy contracted again at the end of the year amid the pandemic lockdowns, Eurostat's initial estimates showed on Tuesday.

The drop was smaller than expected, after a new round of containment measures in the final months of 2020 put a damper on the recovery in the bloc's services sector.

France and Spain also saw consumer prices flip into positive territory, although analysts say the extraordinary circumstances of the Covid-19 pandemic make inflation hard to measure.

During the fourth quarter, the GDP in the whole 27-member European Union was down by 0.5 percent from the previous quarter.

Eurostat said that, according to its first estimation of annual growth for 2020, based on seasonally and calendar adjusted quarterly data, GDP fell by 6.8% in the euro area and 6.4% in the 27-nation European Union.

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The Italian economy contracted more than most other eurozone economies at the end of previous year as tightened curbs limited consumption and activity in large parts of its services sector, figures from the country's office for national statistics showed on Tuesday. Meanwhile Germany inched up 0.1% from the third quarter and Spain grew 0.4%. Overall, economists had expected a drop in the eurozone of as much as 2.5%.

"While the eurozone GDP data were better than what we were expecting only a week ago, the short-term prospects for the European economy remain clouded by a challenging health situation in several countries and an underwhelming start of the vaccination roll-out", said Nicola Nobile, lead eurozone economist at Oxford Economics.

Lagarde told the World Economic Forum last week that 2021 could be a year of recovery, but that would most likely be accompanied by a "very high level of uncertainty".

Eurostat also said that the regional GDP for the whole of 2020 shrank 6.8 percent. China, with a 2.3 percent increase in GDP year-on-year, is expected to be the only major economy to post growth in the pandemic-ravaged year.

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