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ECB survey points to shallower recession, stronger rebound

FILE PHOTO: A woman, wearing a protective mask walks past the head quarter of the European Central Bank (ECB) during sunset in Frankfurt, Germany, April 29, 2020, as the spread of the coronavirus disease (COVID-19) continues. REUTERS/Kai Pfaffenbach

FRANKFURT (Reuters) - The euro zone economy may contract less this year than the European Central Bank had forecast and its recovery could also be quicker, the bank’s Survey of Professional Forecasters showed on Friday.

The quarterly survey sees the economy shrinking by 8.3% this year, a downgrade from its May projection for a 5.5% drop but a more benign outcome than the ECB staff’s own estimate for an 8.7% drop. For next year, growth is seen at 5.7%, above the ECB’s staff’s 5.2% estimate in June.

Although the euro zone suffered its biggest recession in generations, recent data suggest the economy bottomed out in April or May and a recovery is now underway, even if it is bound to be choppy, uneven and prone to setbacks.

The survey was also more optimistic about inflation as it sees 2020 price growth at 0.4% against the ECB’s 0.3% projection while inflation in 2021 is seen at 1% as against the ECB’s 0.8% prediction.

Growth projections for 2025, deemed as the “longer-term”, were left unchanged at 1.4% but the longer-term inflation forecast was cut to 1.6% from 1.7%, short of the ECB’s target for inflation at just below 2%.

Reporting by Balazs Koranyi; Editing by Francesco Canepa

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