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(Sharecast News) - Rising rates of Covid-19 infections across the Continent due to the new Delta variant won't hit economic activity significantly, but the risks need to be carefully monitored, economists at Berenberg said.
In a research note sent to clients, Berenberg's Holger Schmieding said the new wave "probably" would not impact the German broker's above consensus forecasts for the economy to a "significant extent".

Thanks to rapid vaccinations, medical sectors would not come under such big strains as in previous waves - neither in the UK nor on the Continent.

So too, serious new restrictions would likely not be needed.

"Instead, we expect economic activity to decouple further from the trend in infections, as has been the case from wave to wave. So far, the UK experience with the Delta wave supports this view," he explained.

"However, we have to watch the risks carefully."

Indeed, in the same note, Schmieding announced that Berenberg would be resuming its regular Covid-19 updates.

Many countries in the European Union had now administered at least one vaccine shot to well over 40% of their total populations and daily vaccinations were expected to accelerate further over the summer.

On the flip side, the latest data showed that the proportion of infections caused by the Delta variant was rising quickly, by between half or nearly doubling each week, although one needed to note that in many countries total case numbers were in fact at low levels.

The day before, Tom Wenseleers, a biostatistician at the Catholic University of Leuven in Belgium, told CNBC that in several European countries the Delta variant now likely accounted for about half of cases.

Those countries included Spain, Germany, Belgium, Luxembourg, Sweden and the Netherlands.

Recent estimates for France and Italy put the proportion of new cases caused by the Delta variant at 20% and 17%, respectively.

In Portugal on the other hand, Delta accounted for about 90% of new cases, Wenseleers estimated, albeit with a strong geographic focus on Lisbon.

On 25 June, Berenberg had projected that UK and GDP would expand by 7.0% and 5.4% in 2021 and 2022, respectively.

Euro area GDP was pegged at 4.7% and 4.9% over the same time horizon.

The main assumptions underlying Schmieding's forecasts were:

1. No large-scale restrictions would be imposed over the summer.

2. Southern European countries would be able to enjoy at least half the summer tourist season.

3. Vaccines worked and would continue to do so and vaccinations in the developed world would keep the seasonal rise in cases in autumn and winter at bay, perhaps with the help of booster shots.

"Spain has started to follow suit. If the process continues and engulfs other Mediterranean countries, the summer tourist season may fall short of our current expectations. The impact on the Eurozone average would likely remain modest, though," he added.

Well known to many, the land border between Portugal and Spain was completely open.

"Fortunately, the third and most important assumption, that vaccines work well even against the virus variants that have emerged so far, is holding up well in the UK. The link from infections to serious medical complications and to a need to restrict economic activity has weakened."