European Central Bank president Christine Lagarde said that the eurozone economy is likely to contract by as much as 12 per cent in 2020, as member countries struggle to emerge from the coronavirus pandemic.

Lagarde said on Wednesday that the actual economic outcome would come between the ECB’s medium and severe scenarios, ruling out the mild scenario. The severe outlook is for a 12 per cent gross domestic product decline, while the medium scenario is for an eight per cent drop. The mild scenario called for a five per cent contraction.

The currency bloc’s economy shrank by 3.8 per cent in the first quarter of this year, which was the biggest decline since the data series began in 1995.

Meanwhile in the US, another 2.1 million unemployment claims were filed in the week ending May 23, the Labour Department reported on Thursday, pushing the total past 40 million (equivalent to one out of every four American workers) since the coronavirus pandemic took hold in mid-March. The report marks the eighth consecutive week that new jobless filings dipped from the peak of almost 6.9 million, but the level is still far above historic highs. The Bureau of Labour Statistics will release the May jobs report on June 5, and the unemployment rate is expected to have skyrocketed to 19.5 per cent from 14.7 per cent in April.

Finally, in Germany, businesses became more confident about their outlook for the rest of this year, as curbs to slow the coronavirus pandemic are lifted. The Ifo Business Climate index, which gauges business morale among German entrepreneurs, rose to 79.5 in May from a revised 74.2 in April. The uptick came on the back of a marked improvement in business expectations, albeit the views on the current situation edged down slightly.

“The German economy is again seeing light at the end of the tunnel,” said Ifo economist Klaus Wohlrabe. “But we are still far away from optimism.”

Separate data from the Federal Statistics office showed that Europe’s largest economy contracted by 2.2 per cent in the first quarter as a result of restrictions to stop the spread of the virus.

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