Euro zone economy contracts in the first quarter as Covid lockdowns bite

People walk past the closed iconic brasserie Les Deux Magots

LUDOVIC MARIN | AFP | Getty Images

LONDON — The euro zone economy contracted in the first quarter of 2021, as countries implemented new lockdowns and restrictions amid a third wave of coronavirus infections.

Gross domestic product (GDP) in the region fell by 0.6% quarter-on-quarter, according to preliminary data released by Europe’s statistics office Eurostat.

Most of the region’s largest economies — Germany, Italy and Spain — all saw a decline in activity during the first three months of the year.

French surprise

Contractions elsewhere

However, in Germany, the economy contracted 1.7% over the same period. It’s worse than the 1.5% decline that analysts were expecting, according to data from Reuters.

The nation has been severely hit by the third wave and different approaches among its various regions have further complicated its fight against the pandemic.

In Italy, the latest GDP numbers showed a contraction of 0.4% for the quarter, slightly better than expectations. The Spanish economy also shrunk over the same period, 0.5%.

Looking ahead, however, economists are confident about 2021 for the euro zone. Countries in the region are due to start receiving EU-wide Covid support funds in the second half of the year, and the vaccination campaign has accelerated significantly since the start of 2021.

The European Union expects to have 70% of the adult population vaccinated this summer and tourism-reliant countries are hoping that a larger number of vaccinated people will allow them to have a more successful summer season this year.

(With Inputs from cnbc)

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