FRANKFURT, Apr 1 (Reuters) – The forecast made by the European Central Bank three weeks ago for an economic rebound of 4.0% in the euro zone for this year is already in jeopardy due to the increase in infections from COVID- 19, which is forcing governments to delay the reactivation of companies, said the head of economic policy of the ECB, Jens Weidmann, in comments published on Thursday.
The eurozone is lagging far behind the United States’ economic recovery as it struggles to control a third wave of the coronavirus pandemic and its vaccination campaign has been hampered by various delays.
Weidmann, president of the German Bundesbank, warned that the ECB’s GDP forecasts for this year, which were revised up on March 11, could be invalidated if restrictions against the pandemic are prolonged.
“Due to the current strong increase in the number of infections, the relaxation of protection measures could take longer than estimated in the March forecasts,” Weidmann told reporters late on Wednesday for the following day’s publication.
“In this case, the forecast for the GDP growth rate for the euro area in 2021 could no longer be sustainable.”
Weidmann nonetheless pointed out that an effective vaccination campaign could allow the currency bloc to make up lost ground in the remainder of the year.
The Bundesbank president backed the central bank’s decision in March to accelerate its bond purchases – a form of monetary stimulus – despite a temporary rise in inflation, as weak economic activity is likely to keep prices under control.
Weidmann added that the recent rally in German bond yields mainly reflects the better economic outlook for the United States and warned that this could have an impact on rising costs of borrowing for households and businesses in the euro area. .
(Reported by Francesco Canepa; edited by Catherine Evans; translated by Flora Gómez at the Gdansk newsroom)