The Strategist

ECB expects eurozone economy to accelerate

06/11/2021 - 03:46

The European Central Bank (ECB) expects a major acceleration of economic growth in the 19-country eurozone in the second half of this year, the governor, Christine Lagarde, said.

Eurozone real GDP fell 0.3% in the first quarter of this year and was 5.1% down to its pre-crisis level for Q4 2019, she said. Various surveys and indicators hint at the possibility of a significant recovery in business operations in Q2 2020.

"We expect strong growth acceleration to continue in the second half of the year as progress in vaccination (against the coronavirus) will allow for further easing of restrictions," Lagarde said at a press conference after the bank's Governing Council.

For the year as a whole, the ECB has raised its GDP growth forecast markedly to 4.6% in the new June forecast from 4% in the March forecast.

In addition, the ECB raised the eurozone inflation forecast for the current year to 1.9% from 1.5%.

"Annual inflation is expected to be 1.9% this year, 1.5% in this year and 1.4% in 2023," the ECB's June baseline forecast states. In March, 1.5%, 1.2% and 1.4%, respectively, were expected.

The ECB's inflation target is just below 2%. "Inflation will be below our target for the forecast horizon," Lagarde said. "We believe the risks around the euro area forecast for growth are broadly balanced," Lagarde added.