After a relatively mild contraction in 2020, the economy is projected to expand by 4.8% in 2021 and by 2.8% in 2022. The recovery of domestic demand will gather pace on the back of the gradual strengthening of private consumption and investment. The unemployment rate is expected to peak in the third quarter of 2021 at around 6.6%, as short-time work schemes are terminated, and to decline to 6.1% at the end of 2022. Downside risks to the projection include worse-than-expected epidemiological developments that may delay the full phase-out of containment measures, and a persistent labour market weakness. On the upside, an earlier completion of the vaccination campaign could ensure faster control of the pandemic, leading to a stronger rebound in private consumption and investment.
The ongoing vaccination campaign should proceed as fast as possible, as vaccine supply constraints are easing. A strengthening of labour activation policies should be envisaged in the light of the expected termination of job retention schemes in June 2021. A prolongation of targeted support measures beyond 2021 should be considered to help businesses and workers in sectors and activities suffering possible longer-term demand weakness, but which are still expected to recover in the future (such as transport and tourism). The implementation of the recovery and resilience plan should be prompt and complete, focusing on increasing growth potential.