European businesses positive about future, but supportive policies are needed

After an extremely challenging 2020 that was heavily influenced by the COVID-19 pandemic, the European economy is back on track to grow this year. The continuous removal of restrictive measures supported by the rollout of vaccines in the EU is also creating optimism among European businesses. However, there are still several economic trends that could significantly jeopardize the situation in the EU.

According to BusinessEurope’s Autumn Economic Outlook, the European Economy should grow by 4.8% this year and 4.3% next year both in the Euro Area and in the EU27, which means that the economic output should reach pre-crisis levels by the end of 2021. Nevertheless, European businesses are facing difficulties that could potentially harm this positive trend, in particular; increased energy prices, shortage of raw materials and also lack of a qualified workforce.

According to a EUROCHAMBRES survey covering over 52 000 companies from 26 countries, businesses are optimistic regarding 2022. They expect both domestic sales and export demands to increase, investment to rise and unemployment levels to stabilise. However, the access to raw materials, the huge increase in energy prices, the lack of a qualified workforce and increasing labour costs are the main trends that are limiting the optimistic mood among European companies.

Another important impact of the pandemic is the overall change in consumer behaviour. In order to keep the optimistic mood alive, policymakers need to keep supportive fiscal policies and other support measures in place in the short term, before returning to fiscally sustainable positions backed by the revised EU economic governance framework.

Apart from that, inflation needs to be kept at moderate levels, without the risk of creating a damaging wage-price spiral. Furthermore, Member States should focus more intensively on the issue of labour shortage and introduce reforms in the area of education and training that would equip employees with the knowledge and skills needed for the future, especially in the area of green and digital transition.