As confinement measures are gradually lifted, economic growth is projected to rebound strongly in the second half of this year. The euro area is projected to grow by 4.3% in 2021 and 4.4% in 2022, boosted by private consumption, considerable fiscal support and vigorous external demand, notably from the United States. Unemployment is projected to decline to close to pre-crisis levels through 2022. A swift and effective implementation of the EU recovery plan would further bolster the recovery.
With inflation set to remain below the ECB objective by end-2022, monetary policy should remain accommodative. Likewise, national fiscal policies should remain supportive until the recovery has gained momentum and increasingly shift towards fostering resource reallocation in favour of decarbonisation and digitalisation. Boosting public investment is key. For the post-crisis period, the euro area also needs a new monetary policy strategy, with an equally strong policy reaction when inflation is above and below the ECB objective, more effective fiscal frameworks, notably through stronger national ownership, and permanent common fiscal tools. Speeding up the disposal of non-performing loans is essential for credit reallocation towards efficient firms.