The ECB anticipates a recovery in Eurozone GDP of between 4 and 6% in 2021

The European Central Bank (ECB) is forecasting a fall in the Gross Domestic Product (GDP) of the Eurozone of between 5 and 12% in 2020, which, depending on the severity of the scenarios posed by the impact of the COVID-19 disease pandemic and the 'great reclusion', will allow a recovery in activity of between 4 and 6% in 2021.

According to the gentler scenario managed by the ECB, which sees the end of the strict confinement measures during the month of May and a gradual return to activity thereafter, the GDP of the euro area will register a fall of 5% in 2020, which will recover more than enough with the 6% rebound expected in activity of the block in 2021, while in an intermediate scenario, in which strict confinement ends in May but more prolonged containment measures are maintained, it anticipates a contraction of 8% this year and a recovery of 5% in 2021.

However, under the more pessimistic scenario proposed by the ECB, with confinement continuing until June, followed by strict containment measures, the euro zone economy would suffer a 12% contraction this year, with GDP falling by 15% in the second quarter, followed by quarterly growth of 6% between July and September and 3% between October and December, with annual growth of 4% in 2021.

However, the ECB's economists warn that these scenarios should not be seen as an indication of the next macroeconomic projections for the euro area, which the organisation will publish in June 2020 as they focus solely on economic activity, while the June macroeconomic projections will be a full projection exercise, including a detailed assessment of the inflation outlook.

For its part, the panel of economic forecasters consulted by the ECB has drastically revised its forecasts for the euro zone and now anticipates a 5.5% contraction in GDP in 2020, when previously they had expected 1.1% growth, with a 4.3% rebound in 2021 and 1.7% growth in 2022, to reach 1.4% in the longer term (2024).

This deterioration in economic activity will have a significant impact on the euro area's labour market which experts are forecasting will close 2020 with an unemployment rate of 9.4% in comparison with 7.4% in March whilst next year the level of unemployment in the euro area will be 8.9% and one year later 8.4% to lie at 7.7% in the longer term (2024), still above the level seen in March 2020.

With regard to inflation, the panel of experts consulted by the ECB anticipates a deterioration in inflationary pressures this year, with an inflation rate of 0.4%, a third of what they had forecast at the beginning of the year, rising to 1.2% next year and 1.4% in 2022, to reach 1.7% by 2024, still slightly below the ECB's price stability objective.