Eurozone: Growth forecasts revised higher for 2020, a little worse in 2021 – Deutsche Bank

 Analysts at Deutsche Bank revised their GDP growth forecast for the Eurozone. They see now a contraction in 2020 of -8.6% (previously -12%). According to them, the rebound from the post-lockdown will be most visible in the data from the third quarter. 

Key Quotes:

“Q2 saw a record rate of contraction in the euro area but to greater or lesser degrees depending on the member state the GDP outcome was better than we expected. This reflected a less deep lockdown trough and a more rapid post-lockdown bounce. The upside surprises lift our 2020 growth forecasts across the zone. We now expect euro area GDP growth of -8.6%, up from -12% previously (consensus -8.2%).”

“The post-lockdown rebound will be most visible in the Q3 data. Beyond that the pace of normalisation is expected to be slower. To balance the upside and downside risks we have flattened the euro area growth trajectory over the winter half. This lowers our 2021 euro area growth forecast to 4.6% from 5.0%.”

“From the middle of next year we expect a vaccine and disbursements from the EU Recovery Fund to lift growth, especially in the southern member states. The net result is that the consensus is probably too optimistic on euro area growth in 2021 (DB 4.6%, consensus 5.5%) but arguably too pessimistic in 2022 (DB 3.2%, consensus 2.2%).”