According to the latest Bundesbank projections, the German economy will recover following a deep recession in the second quarter of this year. Economic output is estimated to shrink by 7% in 2020, but in the next two years, real gross domestic product (GDP) will then increase by 3 to 4% per year.
“German economic output underwent a massive decline in the first quarter of 2020 owing to the COVID-19 pandemic and the measures taken to contain it,” the Bundesbank notes in the current issue of the Monthly Report. Since these measures were still in place in April and substantial restrictions are likely to persist in spite of an easing in some cases, the experts expect economic output in the second quarter to be significantly lower still.
The Governing Council of the European Central Bank has increased the envelope for the asset purchase programme it launched in response to the coronavirus pandemic, raising the volume of the pandemic emergency purchase programme (PEPP) by €600 billion to €1.350 billion. The horizon for net purchases under the PEPP has been extended to at least the end of June 2021. Key ECB interest rates were left unchanged.
Wuermeling: There will be a transition back to normal
According to Bundesbank Executive Board member Joachim Wuermeling, banks should bear in mind, that there will eventually be a transition back to normal in banking regulation and supervision. “After the crisis, buffers will need to be replenished, and this will take longer when profitability is low – as is the case for many European banks,” Wuermeling said in a speech during a video conference.