Eurozone’s Economy to Experience Worst Recession on Record in 2020

Economists polled by Reuters expect the ECB to accelerate its bond purchase programs as soon as by next month as the Eurozone heads towards the worst ever economic recession in record. Even as countries look to ease lockdown restrictions and resume economic qactivity, the extent of recovery will be based on curtailing a second wave of infections across their regions.

With some countries around the world signalling their interest in reopening their economies, the risks continue to be tilted to the downside as a result of the high uncertainty on whether such moves can effectively work along with keeping a check on the spread of the virus. Although restrictions will be eased over time, social distancing norms and other measures could linger for a long time even as countries work towards economic recovery.

According to the economists, the Eurozone economy is expected to contract by 7.5% this year, far worse than the previous estimate for a 5.4% contraction. Q2 2020 is likely to see the worst performance on account of the extended shutdowns and uncertainties, with economists forecasting a contraction by 11.3% after the 3.8% contraction experienced in Q1 this year.

For now, economists have forecast a rebound towards growth during the second half of the year, but the rate of growth will not be adequate to offset the severe contraction seen during H1 2020. As per their estimates, the Eurozone economy could grow by 7.2% and 2.8% respectively during Q3 and Q4 this year.