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Gloomy Christmas season

 
Gloomy Christmas season

Santa will be less busy this Christmas season. (Illustration)   

NDO - European countries are entering the Christmas season with a quieter atmosphere, as many countries strengthen restrictive measures to curb the spread of the new Omicron variant. Strict blockade measures, introduced right around Christmas and on the eve of the new year 2022, when families spend heavily, have reduced shopping activities, affecting the European economy.


In the context of global supply chain disruptions and complicated developments of the COVID-19 pandemic putting pressure on the economy, the German Central Bank (Bundesbank) has lowered its growth forecast for Europe's leading economy next year and raised its inflation forecast.

The Bundesbank forecasts that Germany's economic growth will reach 4.2% in 2022, down from the 5.2% forecast made in June. According to the Bundesbank, Germany's growth momentum has slowed down due to the pandemic, raging in the last six months of 2021, and lowered its growth forecast for 2021 from 3.7% to 2.5%.

Even so, the Bundesbank's forecast for the growth of Europe's largest economy is still more optimistic than Ifo Institute, one of the leading economic research institutes in Europe. The Ifo institute has lowered its 2022 economic growth forecast for Germany, from the previous forecast of 5.1 percent to 3.7 percent next year. Ifo's business climate index has dropped from 96.6 points recorded last month to 94.7 points.

According to Ifo, the deteriorating pandemic situation is hitting consumer-related service providers and retailers hard. The current supply disruption due to the pandemic is holding back economic growth. At the same time, Germany has to deal with the fourth wave of the epidemic, causing businesses in some areas to close early. In addition, people who have not been vaccinated against COVID-19 are only allowed to go to shops selling essential goods, partly affecting the revenue of business establishments.

Supply chain disruptions, labour shortages and high shipping costs add to the burden on retailers, signalling a dismal Christmas season in Europe. Retailers fear inflation will continue to weigh on consumer spending.

Euro area annual inflation rate was 4.9% in November, mainly due to soaring energy prices, according to the European Statistical Office (Eurostat). In particular, France recorded an inflation rate of 3.4% in November, the highest level in 13 years. In Germany, the inflation rate for the same month exceeded 5% for the first time in three decades.

Falling incomes, increasingly expensive living costs and rising energy prices put Europeans under pressure to spend. Most families in Europe have to "tighten their wallets" to cover the cost of essentials instead of spending on shopping and entertainment as is customary around Christmas.

The imposition of restrictive measures by European countries to control the spread of the Omicron variant affects the purchasing power and spending needs of consumers. Some European countries such as the UK, France, and the Netherlands have announced new restrictive measures, which threaten to affect economic growth in the short term.

British research organisation Oxford Economics, recently forecasted the rapid spread of the Omicron variant globally and the rapid re-imposition of restrictive measures by governments around the world, which could make global GDP growth only 2.3% next year. Economic growth in the eurozone slowed to a nine-month low in December, while prices in Europe continue to climb despite having peaked since record highs recorded more than a month ago.

European countries are prepared to respond to an unprecedented challenge, when the Omicron variant is at risk of "dominating" many countries in the near future. The imposed restrictions and blockades had a strong impact on the economy, making Europe's recovery path not as smooth as expected.


DAN ANH

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