GDP is set to fall by 4.6% in 2020 before picking up by 0.8% in 2021 and 2.9% in 2022. Consumption will rebound in 2021 as households scale back precautionary savings, while investment recovers only moderately due to lingering uncertainty. Unemployment and bankruptcies are expected to peak in the second half of 2021 when support measures will be phased out.
Fiscal policy should remain supportive. The government has extended its main support measures until July 2021, including loan guarantees, grants for small businesses, the job retention scheme and support to the self-employed. Policies should encourage the reallocation of workers and capital, while adapting to the evolving epidemiological situation. The job retention scheme should be adjusted to facilitate worker mobility and training. Public investment should help tackle structural challenges, including low productivity growth and high nitrogen and greenhouse gas emissions, complemented by the EU Recovery and Resilience Facility once available.
The economy is in the midst of a strong expansion. Improved global economic developments have led to solid export growth. In turn, high domestic and external demand and still favourable financial conditions have stimulated private investment. Positive labour market developments, supportive fiscal policy and a stronger housing market have boosted private consumption growth.