ECB survey sees relatively benign recession

The euro zone economy will contract less than many of the more pessimistic projections suggest but the recovery may be slow and gradual, the European Central Bank’s Survey of Professional Forecasters showed on Monday.

The quarterly survey sees the economy shrinking by 5.5 per cent this year, then growing by 4.3 per cent in 2021 with coronavirus-related restrictions lifted starting in May and June.

ECB President Christine Lagarde last week said that the bank sees the economy shrinking by 5.0 per cent to 12 per cent this year, suggesting that Monday’s survey is more in line with the ECB’s “mild” scenario for the recession.

“The most appropriate description for the forecast profile of the overall GDP level is probably a ‘tick-mark’ – i.e. a sharp downward movement at the end of Q1 and at the beginning of Q2, with a flat and elongated recovery that takes quite some time to get back to pre-virus levels,” the survey conducted between March 31 and April 7 showed.

Inflation is now seen averaging 0.4 per cent this year against expectations for 1.2 per cent three months earlier while the 2021 inflation projections was cut to 1.2 per cent from 1.4 per cent.

Still, the survey’s 2024 projections remained unchanged with growth seen at 1.4 per cent and inflation at 1.7 per cent.

“Most respondents also indicated that any normalisation will likely be gradual and that normality will probably not be reached until the third quarter,” the survey showed.