European Commission: EU economy to start growing from 2021

November 6, 2020
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European Commission forecast of the economic situation in the European Union and the euro zone for 2020-2022
Photo: Adobe Stock
The GDP of the European Union countries will decrease by 7.4% in 2020. The region’s economy will start growing in 2021 and will only recover by the end of 2022. The European Union economy will reach its pre-crisis levels if the pandemic declines by the end of the first quarter of 2021.

The European Commission presented an economic forecast in its official report for November 2020.

The performance of the eurozone, which includes 19 EU countries with the euro as the main currency, is in line with forecasts for the European Union as a whole. The only difference is a slightly deeper drop in Eurozone GDP in 2020.

Forecast of GDP dynamics and percentage of Eurozone government debt

Dynamics of GDP and Eurozone government debt
Source: European Economic Forecast, 2020

The graph shows that by the end of 2022, the eurozone could reach its pre-crisis level of 2019. However, for the first time in history, the public debt to GDP ratio in the eurozone will switch to negative values.

The expected growth may not occur if the quarantine does not end by March 2021. Experts from the European Commission note the importance of measures to support the economy, the state of borders, and the speed at which coronavirus vaccines are being developed and distributed. The economy of the euro zone will also be strongly affected by trade relations between the European Union and the UK after Brexit.

The economic outlook for countries with a residence permit for investment

The decline and growth rates of GDP from country to country fluctuate within 3 percentage points. However, the European Commission takes into account that the rate of change in countries will be approximately the same. The reason for 一 is that the economies of the region are closely linked.

The table shows projections for the GDP of EU countries with residence permit or permanent residence permit programmes for investments. Also for the UK, as its economy is closely linked to the EU and the country also has a residence permit investment programme.

Portugal, Greece and Malta are the most attractive countries for investment in 2020一2021, based on forecasts by the European Commission.

GDP forecast of countries with residence permit and permanent residence permit programmes for investments

Country 2020 year 2021 year 2022 year
Austria -7,1% +4,1% +2,5%
Malta -7,3% +3% +6,2%
Greece -9% +5% +3,5%
Portugal -9,3% +5,4% +3,5%
UK -10,3% +3,3% +2,1%

The European Commission explains the recession in 2020 primarily by the decline in revenues from the tourism industry. Before the closure of the borders, tourism was bringing 10-20% of GDP to these countries. With the lifting of the quarantine, the influx of tourists will recover. Following this, real estate prices will start to rise and the economies of Malta, Portugal, Greece, Austria and the UK are expected to grow.

The European Commission’s forecast for Portugal is the same as that of Deloitte. The results of the survey of local company executives and top managers showed that 56% are confident in economic growth in 2021. At the same time, 35% of those surveyed believe that growth will exceed 3%. We talked about the Deloitte report in the material “Portugal has collected 26 World Travel Awards and has become the most comfortable holiday destination in Europe”.

The UK economy will be largely affected by a trade agreement with the EU – or lack thereof. If they do not agree by the end of 2020, from January 1, 2021, countries will be forced to trade according to the WTO most favoured nation principles. This means that the EU and the UK are no longer the best perks to each other. Trading companies do not follow simplified procedures.

You can now buy property in Malta, Portugal and Greece at favourable prices. In this case, the investor will be able to obtain a residence permit of these countries, which allows you to live and do business in the country. With a residence permit or permanent residence permit card, you can travel without visas in the Schengen area.

How the economic situation will affect the investment programme market

The EU countries will think about attracting foreign investment to compensate for the downturn in the economy and tourism. One possible option is to launch a residence permit or citizenship programme for investment.

In September 2020, the Slovenian government thought about opening a programme for investment. The minimum investment amount could be 1 million euros. The Slovenian government has not yet made a decision on the matter. We talked about this in the material ‘Slovenia can launch a citizenship programme for investment’.

Countries with existing residence permit programmes may amend the conditions to make them more attractive to investors. In 2020, Portugal and Greece have already made such changes.

In July 2020, Portugal increased the validity of residence permit cards. Now the status should be extended in 2 years, not a year as before. The new rules apply to investors who took part in the programme after 1 April 2020.

The Government of Portugal has also simplified the conditions under which the children and grandchildren of an investor can obtain citizenship. There are 2 conditions for this: the child must be born in Portugal and the parents must have lived in the country for at least a year on a residence permit card.

The Government of Portugal has also simplified the conditions under which the children and grandchildren of an investor can obtain citizenship. There are 2 conditions for this: the child must be born in Portugal and the parents must have lived in the country for at least a year on a residence permit card.

In May 2020, Greece simplified the terms of the residence permit programme when buying real estate. Investors were allowed not to come to the country to undergo the program procedures. The government also allowed the programme to pay for its costs from foreign accounts.

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