The euro area real GDP could remain well below the level seen at the end of 2019 until the end of 2022 under severe situation, the European Central Bank reported Friday.
The ECB said the high uncertainty surrounding the economic impact of the COVID-19 pandemic warrants an analysis based on alternative scenarios. According to the estimate, the economy could shrink as much as 12 percent in severe scenario.
The annual figure under the severe scenario reflects a quarterly real GDP growth reaching a trough of around -15 percent in the second quarter of 2020, followed by a protracted and incomplete recovery, entailing quarterly growth rates of around 6 percent in the third quarter and 3 percent in the fourth quarter of 2020.
In a blog post on Friday, Philip Lane, ECB’s executive board member said the contraction will be much more pronounced in the second quarter, since lockdown measures were in full force by April across the euro area and in many other countries.
He said the bank will further adjust its instruments if warranted. This includes increasing the size of the pandemic emergency purchase programme and adjusting its composition as much as necessary and for as long as needed.
On Thursday, the ECB had strengthened its liquidity supportive measures as the currency bloc contracted in the first quarter at the sharpest pace since 1995.