The sharp economic downturn caused by the coronavirus pandemic will be followed by a rebound — but it will take around two years.
Euro zone GDP was lackluster in the latter part of 2019, caught in the headwinds of the U.S.-China trade war.
They likened the rebound to a "tick mark recovery." "The sharp downturn will be followed by a slightly flatter upturn that ultimately goes beyond the pre-coronavirus level of gross domestic product ," Berenberg's Chief and Senior Economists, Holger Schmieding and Kallum Pickering, respectively, said in a note Wednesday.
The outbreak, and its accompanying lockdowns on public life and business around the world, continues to wreak havoc on health-care systems, economies and humanity. To date, there are 883,225 confirmed cases of the virus around the world, according to Johns Hopkins University data. Likewise, Germany's council of economic advisors warned Tuesday that the euro zone's largest economy could shrink 5.4% in 2020. The panel said its baseline scenario — in which the economic situation would normalize over the summer — was for the economy to contract by 2.8% this year before potentially growing by 3.7% next year, Reuters reported.
But, they added, as long as monetary, fiscal and regulatory policies remain in "whatever it takes" mode, then the risks of second-round effects such as those of a follow-up financial crisis can be contained. "Many activities that had to be switched off can then be switched on again step by step, but some activities such as long-distance travel will be restrained for much longer. The fiscal stimulus will partly offset some hesitation by consumers and companies to spend," they said.
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