The global recovery is in a rocky phase with Covid numbers high, tighter social distancing restrictions and all with activity still below pre-crisis levels in most major economies. Large-scale ongoing economic policy support remains crucial for the recovery.
Multiple effective vaccines are now being distributed, increasing prospects of a calmer and more sustained recovery leg in the second half of 2021. Recent US fiscal news and the UK-EU trade deal have further reduced downside risk. Vaccine rollout will take time, however.
There will be some long-term damage from the crisis that may weigh on the recovery. We are still likely several quarters away from a return to pre-crisis levels of economic output in Europe. Premature fiscal tightening, virus mutation and inflation are among risks to the 2021-22 outlook.