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."
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."