European Union upbeat over economic growth, concerned about inflation

European Union economies are set to rebound by their highest rates in decades as coronavirus restrictions ease, but still face risks posed by COVID-19 variants and concerns over inflation, the EU's executive branch said Wednesday.

The European Commission's 2021 summer forecasts predict that the economies in the 27-nation EU, and among the 19 countries using the euro single currency, are expected to expand by 4.8% this year, around half a percentage point higher than foreseen under the previous forecast.

Real gross domestic product is expected to return to its pre-coronavirus crisis level in the last quarter of this year. Growth in 2022 is predicted to hit 4.5%.

The commission puts its increasing optimism down to the fact that economic activity early this year has exceeded expectations, and due to the impact of coronavirus vaccine strategy, which has led to falling numbers of new infections and hospital admissions.

The EU economy is set to see its fastest growth in decades this year, fuelled by strong demand both at home and globally and a swifter-than-expected reopening of services sectors since the spring, Economy Commissioner Paolo Gentiloni said.

But he warned that the EU must redouble our vaccination efforts, building on the impressive progress made in recent months: the spread of the delta variant is a stark reminder that we have not yet emerged from the shadow of the pandemic.

The commission said the economic risks depend on how households and companies respond to any new tightening of restrictions to stop the spread of variants. It also warned that inflation could rise if supply restrictions last and price pressures are passed on to consumer prices.

For now, inflation in the EU is forecast to average 2.2% this year, up 0.3 percentage points over predictions in May, and 1.6% in 2022. It's forecast to average 1.9% in the euro area in 2021, up 0.2 percentage points, and 1.4% next year.