One year after the start of the pandemic, lockdown measures and behavioural changes still weigh on economic activity in the euro area. After another decline in the fourth quarter of 2020, output is currently 5 percent below its pre-crisis level, with considerable differences between sectors and member states. Leading indicators confirm a mixed picture with strong industrial confidence but poor sentiment of service providers. A further drop in consumption-related mobility points to another GDP decline of about 1 percent in the first quarter of 2021. However, due to accelerated vaccination roll-out in the months ahead, combined with improving seasonal conditions, the pandemic-related restrictions on economic activity are expected to be lifted to a large extent over the course of the summer. Under this assumption, we expect all sectors of the economy to rapidly return to pre-crisis levels of activity in the upcoming quarters. Economic output is set to normalise with particularly strong growth rates for trade in services, private consumption and equipment investment. Overall, gross domestic product is expected to grow by 4.8 percent in 2021 and by 4.3 percent in 2022. The pre-crisis level of economic activity will probably be exceeded at the end of 2021.