Following a relatively mild contraction, GDP is projected to grow by around 3% in 2021 and 2022 on average, as confidence strengthens and investment picks up slowly with the rollout of an effective vaccine. Unemployment has risen in the wake of the crisis and, despite some gradual decline, it will remain above the pre-pandemic level. Inflation will move upwards in tandem with the revival of economic activity.
A comprehensive package of fiscal and financial measures averted a sharper GDP contraction in 2020. The short time work scheme and support for non-standard workers, along with increases in social benefits, mitigated the impact of the crisis on jobs and poverty. Targeted support should continue given the uncertain outlook. Structural measures, especially effective skilling and re-skilling programmes, are essential for the reallocation of workers and stronger long-term growth.