The decline in the eurozone gross domestic product (GDP) was adjusted slightly upward to -3.6 per cent from 3.8 per cent initially estimated, data published by Eurostat showed. The decline is nonetheless historic, caused ‒ by and large ‒ by domestic lockdowns to combat the coronavirus pandemic. This fall reversed a 0.1 per cent growth registered in the fourth quarter of 2019.

On a yearly basis, GDP contracted by 3.1 per cent, reversing the previous quarter’s one per cent expansion. The first quarter rate was revised from -3.3 per cent and was the largest fall since the third quarter of 2009. Unsurprisingly, the largest decline was seen in the services sector, especially wholesale and retail trade, which also includes accommodation and food service activities. These were hit hard by the lockdowns, falling 6.8 per cent quarter-on-quarter.

Meanwhile, at its monetary policy meeting on Wednesday, the Federal Reserve (Fed) kept interest rates between zero and 0.25 per cent and indicated they are likely to remain that low through 2022 as the economy recovers from the coronavirus pandemic. The Fed also said it will continue to increase its bond holdings, targeting Treasury purchases at $80 billion a month and mortgage-backed securities at $40 billion. Together with the rate decision, the central bank announced that it projects the economy will shrink 6.5 per cent in 2020, a year that saw an unprecedented lockdown in an effort to overcome the coronavirus pandemic. However, 2021 is expected to show a five per cent gain followed by 3.5 per cent in 2022, both well above the economy’s longer-term trend.

Finally, the Organisation for Economic Cooperation and Development (OECD) said the global economy is undergoing the deepest recession since the Great Depression in the 1930s due to the coronavirus pandemic. As restrictions begin to ease, the path to economic recovery remains highly uncertain and vulnerable to a second wave of infections, the Paris-based think tank said in its latest Economic Outlook, published on Wednesday.

The OECD expects global economic activity to fall by six per cent in 2020 if a second wave of infections is avoided. In this scenario, the world economy would expand by 5.2 per cent in 2021. But global GDP would fall more sharply by 7.6 per cent this year before rising 2.8 per cent next year in case of a second outbreak of the virus, triggering a return to lockdowns.

This report was compiled by Bank of Valletta Ltd for general information purposes only.