Coronavirus: Banks increase estimates of economic damage

Coronavirus: Banks increase estimates of economic damage
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The continuing confinement as a result of the coronavirus, together with the prospects for a relaunch of the economy, have led the leading Belgian banks to review their prognoses for the economic damage the epidemic will end up causing.

According to an informal survey carried out by Het Laatste Nieuws, banks are predicting negative GDP growth of up to 9.5% for 2020, and up to 12.3% for 2021.

When asked at the end of March – two weeks into lockdown – for a prediction on the economic damage for 2020, BNP Paribas Fortis foresaw a reduction in GDP of 3.5%. Now the bank reckons the figure will actually be 7.1%.

More optimistic in March, KBC reckoned on a 0.4% fall in GDP. Now its prediction is the blackest of all: a fall in GDP of 9.5%.

And the crisis will continue into 2021, as GDP plummets a further 7.6% according to BNP Paribas Fortis, all the way down to minus 12.3% for KBC.

In contrast to our previous forecast, we do not expect a rapid return to the pre-crisis situation,” said Koen De Leus, chief economist at BNP Paribas Fortis. “We expect a gradual opening of the economy from the beginning of May, with on average just over half of the measures in force in that month. For June, we expect further easing to 30 percent.”

The bank also expects a minimum of the current measures will still apply in the second half of the year, resulting in loss of production, definitive closures and a rise in unemployment from 5.4% before the crisis to 7.5%.

The same gloomy outlook is shared by KBC.

"It is going to be a real corona crisis," said chief economist Jan Van Hove. "What we see in China leads us to suspect a temporary economic shock, after which a fairly clear recovery may follow. For Belgium, this recovery can even be very strong thanks to government measures such as temporary unemployment and financial measures for those in the greatest need."

Alan Hope

The Brussels Times

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