The euro zone economy's worst recession on record will be even deeper than forecast less than a month ago, according to a Reuters poll of economists who said the European Central Bank will ramp up its bond-buying again next month.
BENGALURU - The euro zone economy’s worst recession on record will be even deeper than forecast less than a month ago, according to a Reuters poll of economists who said the European Central Bank will ramp up its bond-buying again next month.
“The biggest uncertainty now is around the pace of the reopening of the economy. There is a series of risks that are still to the downside...We may have a more prolonged period of confinement measures imposed by law or just behaviourally,” Giada Giani, European economist at Citi, said. The euro zone economy is expected to contract 7.5% in 2020, more than the 5.4% predicted three weeks ago, with the worst of the blow expected this quarter.
But the worst-case scenario has the economy contracting in Q3 as well as Q2, while stagnating in Q4, showing powerful downside risks to forecasts.into a deep recession after the steepest quarterly contraction since the 2009 financial crisis at the start of the year, official preliminary data showed on Friday.Despite the substantial fall in GDP, the unemployment rate is expected to rise only about two percentage points to 9.3% in 2020 from recent lows of 7.4%.
That does not include the 20 billion euros per month of purchases already announced in response to a slowdown that had taken hold well before the coronavirus hit Europe. The poll forecast the ECB’s balance sheet, currently at around 5 trillion euros, would expand to 6.5 trillion euros by year-end.“At the moment, it has the objective of making the usage of fiscal policy easier. The ECB can do this by increasing the size of purchases and extending it beyond this year.
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