Europe | Cities are recovering, but uncertainties remain

European cities are on the road to recovery, as the improving health situation and gradual lifting of restrictions provide the foundation for a consumer-led revival. But the economic environment remains shrouded in uncertainty, with risks still skewed to the downside, albeit to a lesser extent than earlier in the pandemic.
What you will learn:

• European cities have emerged from a difficult start to the year thanks to the gradual lifting of social restrictions. We expect a strong consumer led rebound through the rest of 2021 and into 2022, which should be sufficient for GDP in most cities to have returned to pre-pandemic levels by the end of next year.
• But the recovery could be easily knocked off track. In our moderate downside scenario, the return to pre-pandemic levels of GDP and employment is delayed by a year. And a more severe downside risk, perhaps due to the reintroduction of social restrictions that derails the consumer recovery, would see most city economies fall back into recession in 2022.
• Whilst the risks to our baseline outlook are tilted to the downside, a stronger bounce back can’t be discounted. The most likely driver would be a more vigorous recovery in consumer spending than is currently anticipated, and whilst all cities would benefit, those most reliant on social consumption would reap the greatest gains.