Pent up demand and savings will be the fuel propelling Europe to an economic recovery from the COVID-19 crisis three times faster than after the Great Recession of 2008.
Financial services company Morgan Stanley says the willingness of Europe consumers to spend, and a high level of savings, will boost the continent's recovery - along with continued government fiscal and monetary support.
"This initial surge turns into a sustained robust expansion, backed by ongoing policy support," Morgan Stanley said in its latest European economic outlook.
Morgan Stanley expects a "strong rebound" in 2021 owing to the desire of Europe consumers to spend.
"In spring 2021, assuming wide availability of an effective vaccine, we see pent-up demand and higher savings fueling a strong rebound, in an echo of the third quarter," according to the report.
This recovery will occur after Europe deals with a second wave of COVID-19 infections made worse by the colder weather. Some European countries such as France, Germany and Belgium are now resorting to lockdowns to slow the spread of the disease.
Europe accounts for 15.5 million, or 28%, of the world's 54.8 million confirmed COVID-19 infections based on data from the World Health Organization.
The European Central Bank is increasing its purchases of government bonds, reducing borrowing costs for banks and keeping interest rates at record lows. It will announce more packages in December.
Morgan Stanley sees a world recovery in 2021. It estimates growth as high as 6.4%. Economic output will eventually return to levels last seen before the pandemic.
Morgan Stanley forecasts China will return to its pre-COVID status by the end of this year. It expects the U.S. to do so in the fourth quarter of 2021.
Morgan Stanley says a combination of policy support, liberal financial conditions from central banks and governments are working to power the world economic engine, the company said.
News about two vaccines found to be more than 90% effective over the past few weeks is helping ease concerns of business owners.
