Thursday, April 9, 2020

9/4/20: Ifo Eurozone Forecast Q1-Q3 2020: Covid19 Impacts


Germany's ifo Institute joint forecasts for Eurozone growth are out today. Bleak reading. The forecasts below assume that Covid-19 restrictions will be gradually lifted over the summer 2020.

Seasonally and working-day adjusted GDP growth:


From ifo forecast: "The economy in the euro area is expected to slide into a deep recession in the first half of 2020:

  • GDP growth is forecast to be -2% in Q1 and -10% in Q2, followed by a recovery in Q3 with +8%. 
  • Due to the lack of comparable events in the last decades and the unpredictable course of the pandemic, these estimates are subject to substantial uncertainty."
  • "Gross fixed capital formation is also certain to decline, with -2% in Q1 and -10% in Q2, due to supply disruptions, planning uncertainty and a preference for liquidity."
  • "Foreign demand is likely to contribute negatively to growth, as a result of the euro area’s exposure to recessive international trade and a struggling global economy."


Inflation environment:

Headwinds and risks: 

  • "A more unfavorable course of the pandemic would require longer and possibly stricter containment measures...
  • "Despite massive liquidity provision by governments and central banks, a prolonged downturn would then lead to liquidity strains in the economy. 
  • Increased debt levels associated with low income flows and asset devaluations are likely to lead to solvency issues for thinly capitalized corporations and private households.
  • An ensuing rise in loan defaults could in turn lead to problems in the banking sector." 
  • "A resurgence of the European debt crisis on a large scale thus constitutes a non-negligible risk to the forecast."

No comments:

Post a Comment