EU raises estimates for Eurozone growth with warning on inflation

The Commission predicted that the single currency bloc's economy will grow by 4.8% in 2021, compared to the previous forecast of 4.3% it reported in May.

Real gross domestic product was expected to return to its pre-coronavirus crisis level in the last quarter of the current year. GDP growth in 2022 meanwhile was predicted to hit 4.5%, versus a 4.4% estimate in May.

However, Brussels also now expected higher inflation in the Eurozone in 2021 than what it had initially forecast, but estimated consumer prices growth will slow in 2022.

Inflation could rise more quickly if supply restrictions last and price pressures are passed on to consumer prices, the commission added.

EU price gains were forecast to average 2.2% in 2021, up 0.3 percentage points over predictions in May, and 1.6% in 2022.

In the euro area it was forecast to hit 1.9% in 2021, up 0.2 percentage points on the Commission's prior estimate, and 1.4% in 2022.

That compares to the European Central Bank's target for Eurozone inflation of close to but below 2%.

The revisions followed the reopening of euro area member states' economies in the second quarter of 2021, which benefited the services and tourism sectors.

“The EU economy is set to see its fastest growth in decades this year, fueled by strong demand both at home and globally and a swifter-than-expected reopening of services sectors since the spring,” Economy Commissioner Paolo Gentiloni said.

Nonetheless, Brussels also warned about the potential risks from the effects that the new variants of the coronavirus and the ensuing government restrictions to control their spread might have.

"We must redouble our vaccination efforts, building on the impressive progress made in recent months: the spread of the Delta variant is a stark reminder that we have not yet emerged from the shadow of the pandemic," added Gentiloni.

The Commission also revised upwards its forecasts for the bloc's three largest economies, with France's seen expanding by 6.0%, Italy's by 5.0% and Germany's by 3.6%.

During the following year, growth was seen accelerating to 4.6% in Germany and remaining strong at 4.2% in both France and Italy.