Eurozone economy could shrink by 5-12% in 2020 due to COVID-19 crisis: ECB

The President of the European Central Bank (ECB), Christine Lagarde has said on April 30 that the Eurozone economy is likely to decline by 5-12 per cent in 2020 amid coronavirus outbreak. During the press conference, she noted that the extent of economic fallout in the region still remains surrounded with “high uncertainty” because it depends 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. According to Lagarde, as the restrictions in the area would be lifted gradually, the economy would bounce back at an unknown rate of " speed and scale".

Lagarde said, "Given the high uncertainty surrounding the ultimate extent of the economic fallout, growth scenarios produced by ECB staff suggest that euro area GDP could fall by between 5% and 12% this year, depending crucially on the duration of the containment measures and the success of policies to mitigate the economic consequences for businesses and workers."

"As the containment measures are gradually lifted, these scenarios foresee a recovery in economic activity, although its speed and scale remain highly uncertain," she added.

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Euro zone's third-largest economy drops

Meanwhile, the preliminary data revealed on April 30 has stated that Eurozone's third-largest economy, Italy is plunged by 4.7 per cent in just the first quarter of 2020. Being one of the worst affected countries of COVID-19 outbreak, Italy has been under lockdown to curb the further spread of the disease that has resulted in the biggest quarterly collapse in its economy in at least 25 years. 

According to national statistics bureau ISTAT, the fall in Italy’s Gross Domestic Product in a quarter was the steepest since the current series had begun in 1995. This has reportedly left Italy in the recession which also witnessed a decline of 0.3 per cent in the last quarter of 2019. ISTAT also said that if the GDP is calculated on a year-on-year basis, the first quarter declined by 4.8 per cent.

Along with Italy, even Germany recently predicted that its economy would shrink by 6.3 per cent in 2020 because of the pandemic. According to reports, German finance minister Peter Altmaier also said on April 29 that it would be the biggest collapse in 50 years. Most world leaders are currently battling to find a balance between the plunging economy and flattening the curve of COVID-19 spread.

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