After Collapse, Eurozone Economy Starts Slow Recovery
Economic output in the euro area suffered a sharp plunge in the second quarter, which is now being followed by a slower recovery. This is the expectation of the ifo Institute in Munich and KOF in Zurich in their Eurozone Economic Outlook (EZEO). The overall forecast is uncertain because nobody knows how the coronavirus pandemic will continue, how companies’ liquidity situations will develop, and how consumers will behave.
The institutes estimate that the second quarter will see a 12.3 percent drop over the first quarter, which had already fallen by 3.6 percent. In the third quarter, the economy will grow by 8.3 percent; in the fourth, by a further 2.8 percent. However, this adds up to a contraction in all goods and services produced of 8.1 percent for the year as a whole.
In the second quarter, all key figures are in the red: industrial production shrank by 18.9 percent owing to coronavirus-related shutdowns, private consumption by 11.8 percent, and investment by 15.4 percent quarter over quarter.
In the third quarter, after the restart, industrial production will rise by 14.7 percent, and in the fourth quarter by 2.7 percent; on balance, this amounts to minus 11.3 percent for the full year. The other key figures are similar. Prices will fall by 0.9 percent in the third quarter but will rise by 0.3 percent in the fourth quarter, equating to 0.0 percent for the full year.
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. Italy’s Istat statistical office did not participate in the Eurozone Economic Outlook for the second quarter. 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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