Eurozone economy to shrink by 8.7% in 2020 due to COVID-19 crisis: ECB chief

As the coronavirus outbreak severely impacted the global economy, European Central Bank chief Christine Lagarde said on June 4 that the Eurozone economy will plunge by 8.7 per cent in 2020 before it begins rebounding in 2021. While more and more countries have now started lifting restrictions and introducing stimulus packages to boost their most GDP-providing industry, the growth in Europe is expected to come in at 5.2 per cent in 2021 and 3.3 per cent in 2022.

ECB chief also noted that the span of recession in 2020 would “depend crucially on the duration and effectiveness of containment measures" along with the schemes introduced by the government. 

Lagarde said, “The latest economic indicators and survey results confirm a sharp contraction of the euro area economy and rapidly deteriorating labour market conditions.”

“The coronavirus pandemic and the necessary containment measures have severely affected both the manufacturing and services sectors, taking a toll on the productive capacity of the euro area economy and on domestic demand,” she added.

Read - Eurozone Economy To Shrink By 8% To 12% In 2020 Due To Pandemic Crisis: ECB

Read - Eurozone Economy Could Shrink By 5-12% In 2020 Due To COVID-19 Crisis: ECB

‘Exceptional uncertainty’

Similar to the press conferences in the past amid COVID-19 pandemic, ECB chief again noted the “uncertainty” surrounding the rebound and the economical growth in Europe. Lagarde even mentioned two alternative scenarios of the rebound graph depending on the duration of the precautionary measures Europe has taken to curb the further spread of deadly COVID-19 disease. Moreover, the success of the policies by the officials to rectify the impact of the pandemic on the economy would also play a significant role in determining the GDP of the euro area. 

ECB chief, “In general, the extent of the contraction and the recovery will depend crucially on the duration and the effectiveness of the containment measures, the success of policies to mitigate the adverse impact on incomes and employment, and the extent to which supply capacity and domestic demand are permanently affected.”

“Overall, the Governing Council sees the balance of risks around the baseline projection to the downside,” she added.

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(Image Source: AP)