Macro: COVID-19 Update - Economic outlook euro area part 6: Euro economy must work its way out of deep trough

The global economic development is marked by the Corona Pandemic and the associated restrictions on business operations. In the euro area, the strongest restrictions to curb the dynamics of the infection occurred from mid-March to April. This resulted in a historically unique slump in economic output. In the first quarter, GDP declined by 3.6% qoq and, according to the flash estimate published at the end of July, the recession deepened in the second quarter, as generally expected. At -12.1% qoq, the slump in the euro area was even deeper than we had expected. We are therefore lowering our GDP growth forecast for 2020 from -6.5% to -8.1% yoy. The results were particularly poor in Spain (-18.5% qoq), Portugal (-14.1% qoq) and France (-13.8% qoq). In Italy (-12.4% qoq) and Belgium (-12.2% qoq) the result was broadly in line with the euro area average. In Austria (-10.7% qoq) and Germany (-10.1% qoq), economic output collapsed less sharply than the euro area average.

This Research was produced and first published by Raiffeisen Bank International AG which is supervised by the Austrian Financial Market Authority and the National Bank of Austria.