The beginning of the end of the crisis, but diverging vaccination speeds are adding to risks
The US and UK are on track to roll back most COVID-19 mobility restrictions by the end of Q2, but Europe is hampered by vaccine delivery disruptions, regulatory suspensions and rising new infections. We leave our real GDP growth forecasts unchanged, but see increasing near-term downside risks to Euro area GDP growth. We caution that lockdown fatigue may lead to a rise in protests or social unrest in some countries. Still, we expect Europe's situation to stabilise in Q2 as vaccination deliveries are scheduled to triple vs Q1.
The US and the UK commence reopening as they make rapid progress on vaccination, and their cases and deaths have fallen sharply.
Downside risks to Euro area GDP growth rise as increases in infections lead to a national lockdown in France and longer restrictions in other countries.
A proposed US infrastructure package of USD 3.2 trillion will support growth but risks of overheating are increasing.
Global business sentiment is improving with Euro area and UK PMIs pointing to expansion in economic activity ahead.