Central bank will increase pandemic bond-buying scheme if necessary, says Philip Lane
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Eurozone recovery to take three years, warns ECB’s chief economist
The European Central Bank’s chief economist has warned it is likely to take at least three years for the eurozone economy to fully recover from the “extraordinary and severe shock” of the coronavirus crisis.
Philip Lane said that under the “severe” scenario modelled by the ECB — entailing a 12 per cent decline in eurozone gross domestic product this year — the economy would not still return to its level at the end of last year before 2023.
A chart published by the ECB indicated that the same outcome would occur under its “medium” scenario that entails an 8 per cent economic contraction this year. Only under its “mild” scenario of a 5 per cent economic shrinkage this year would the eurozone fully rebound by the middle of next year.
“The scale and duration of the pandemic macroeconomic shock depends on how long the lockdown measures remain in place, their impact across sectors and the speed at which economic activity normalises,” Mr Lane wrote in a blog published on Friday.
The eurozone economy shrank by a record quarterly rate of 3.8 per cent in the first three months of this year, figures published on Thursday showed. Most economists expect the decline to be much steeper in the April to June period because the strict lockdowns that have frozen much economic activity were only introduced in March.
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