Coronavirus hits Europe

The coronavirus is now s preading fast in E urope . The initial hope that the virus could be mostly contained within China has turned out to be false. This also means that the economic impact stemming from the outbreak will not only come via slower growth in China and the disruption of supply chains connected to China , but also via a direct effect on production in Europe. We now expect euro area growth to be flat during the first half of this year, with growth in Germany and Italy being slightly negative , while the French and Spanish economy being somewhat less affected . One crucial assumption underlying our forecast is that the virus will be contained by Q2, leading to a significant rebound in activity thereafter. Among economic sectors , we thin k that aviation and hospitality will be affected the most, followed by the car and raw material sector. We also believe concerns regarding the future performance in the Retail Real Estate sector could rise, although only temporary.