Eurozone Economic Outlook: Euro Area Slides into Recession
Over the next few months, the euro area will slide into recession. This is the forecast of the ifo Institute in Munich and KOF in Zurich in their Eurozone Economic Outlook (EZEO). Economic output is likely to have shrunk by 2.3 percent in the first quarter and will shrink by another 10.5 percent in the second quarter; for the third quarter of 2020, the researchers are forecasting growth of 8.7 percent. All figures are quarter over quarter.
“The coronavirus pandemic is an unprecedented shock to the world economy,” the researchers write. Drastic fluctuations in industrial production are one consequence of this. It is likely to have fallen by 4.4 percent in the first quarter and will shrink by a full 18 percent in the second quarter. For the third quarter, the researchers expect a return to growth of 19 percent.
The slump in private consumption will be similar: minus 3.3 percent (Q1), minus 13.6 percent (Q2), plus 12 percent (Q3). Investment is expected to develop as follows: minus 2.3 percent (Q1), minus 10.0 percent (Q2), plus 10.4 percent (Q3).
“These economic forecasts are subject to great uncertainty. The possibility that the pandemic will abate earlier than expected is small,” the researchers add. “A resurgence of the European debt crisis on a large scale therefore represents a material risk to the forecast.”
Italy’s Istat statistical office was unable to participate in this edition of the EZEO. However, it will participate again as usual starting with the next issue.
Eurozone Economic Outlook
This quarterly publication is prepared jointly by the German external pageifo Institutecall_made, the KOF Swiss Economic Institute, and the Italian external pageIstatcall_made Institute. The forecast results are based on consensus estimates building on common macroeconomic forecast methods by the three institutes. Details and graphs can be found in the right column.
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