Four years into the Next Generation EU programme: an updated preliminary evaluation of its economic impact

NextGenerationEU (NGEU) is the largest ever programme of the EU and aims to support its economic recovery after the pandemic crisis and to modernise economies, with a focus on digital and green transformation. This article provides an updated description of the implementation effort as well as an assessment by ECB staff on the impact on the euro area economy. Based on a variety of models and scenarios, it is estimated that the public expenditures and structural reforms linked to NGEU will have a positive impact on euro area output, while the impact on inflation is expected to be muted. The expected positive effect on potential output should help reduce government debt ratios, as projected for the main beneficiary euro area countries. Compared with the initial assessment by ECB staff from 2022, the macroeconomic impact of NGEU is expected to materialise later but to be of similar size. Delays in the implementation of NGEU-linked expenditures and reforms are the key factor behind this reprofiling. The cumulated estimate remains broadly unchanged in the presence of two opposite forces: first, an increase in the nominal RRF-related investment financing grants to euro area countries and second, the unanticipated inflation which eroded the real value of the funds. JEL Classification: C54, E02, E22, E62, F45, H87, O52