Eurozone Economic Forecast

Eurozone Economic Outlook

June 2, 2020

A second estimate confirmed the Eurozone economy contracted at an unprecedented pace in the first quarter, as lockdown measures adopted in March froze business and household activity. Moreover, the prolongation of containment measures, which are now gradually being lifted, will deal an even harder blow to the economy in the second quarter. The economic slump is translating into quickly deteriorating fiscal metrics, which prompted the ECB to warn already-highly indebted countries such as Italy and Spain of rising risks of debt sustainability. Complicating matters, in early May, Germany’s Constitutional Court questioned the legality of European monetary policy and threatened to prevent Germany’s Bundesbank from making additional asset purchases unless the ECB proves it was not excessive within three months. Meanwhile, following a Franco-German proposal of a EUR 500 billion recovery fund, the European Commission sketched a proposal for a EUR 750 billion stimulus plan, the first step of lengthy discussions.

Eurozone Economic Growth

The pandemic will leave a desolate economic landscape in its path, ravaging investment activity and household spending amid soaring unemployment figures. Moreover, the tourism sector will be hard hit, depressing external demand. On top of that, sharply deteriorating public finances and worsening bank credit quality pose further downside risks. The economy is seen contracting 8.2% in 2020, which is down 1.2 percentage points from last month’s forecast. In 2021, GDP is seen increasing 5.8%.

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Eurozone Facts

Value Change Date
Exchange Rate1.120.65 %Dec 31

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