Her Eleftherias Kourtali
The expectation of a strong tourism recovery, combined with boosting activity in the services sector and support from the Recovery Fund, means that the economies of Southern Europe will generally perform better than the rest of the continent this year, Oxford Economics notes.
Despite initial concerns about the effects of the Omicron variant and the war in Ukraine, Oxford Economics has been optimistic about tourism prospects for some time. This positive view continues to be reinforced, especially after the excellent data of the Easter period, the first true test for the tourism sector.
The outstanding outlook for the industry means that traditional tourism forces, such as Spain, Greece and Portugal, will be the winners in 2022 in terms of GDP growth and the fastest growing eurozone economies this year, according to forecasts. Oxford Economics.
More generally, in addition to tourism, a strong return to “social” consumption after two years of restrictions will also boost growth in these countries, given their economic structure. Despite its large tourism sector, Italy’s outlook is not so positive, as the country is the second largest industrial economy on the continent and will therefore be more affected by the headwinds that hit the industry.
Another important factor supporting the South’s performance is the prospect of a large increase in public investment this year, due to the allocation of funds under the EU recovery program, Next Generation, as the economies of the eurozone region will be among the largest recipients of funds. But beyond that, the house notes that the differences in the overall fiscal stance have very little correlation with the relative performance between countries this year.
Southern Europe’s overperformance is significant, according to Oxford Economics, as it comes at a time when investors are increasingly worried about rising regional bond yields. “We believe these winds are strong enough to offset the tightening of economic conditions in the short term, but we see growing risks to the 2023 outlook for the euro area when these positive winds stop and the impact of higher interest rates begins. to be fully fed into the economy “, he emphasizes.
Source: Capital
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