Bonds News

UPDATE 1-ECB sees faster 2022 economic pick-up as COVID immunity spreads

 (Adds COVID herd immunity projection)
    FRANKFURT, Dec 10 (Reuters) - The ECB expects economic
growth to rebound more slowly next year as COVID-19 weighs on
output, but the recovery could be quicker than thought in 2022
as vaccines bring herd immunity against the virus, its President
Christine Lagarde said on Thursday.
   In what it describes as the baseline scenario, the European
Central Bank said in updated economic projections that it
expected GDP to expand by 3.9% percent next year, slower than
its September forecast of 5%. 
    But in 2022, growth is seen at 4.2%, above a previous
projection of 3.2%, Lagarde said.
    Developments in the pandemic including projected vaccine
rollouts gave the ECB "good reasons to believe that by the end
of 2021... we will have reached sufficient herd immunity to hope
that ... the economy will begin to function under more normal
circumstances", she added. 
    That was particularly the case for the service sector that
"will not be impaired by a lot of these social distancing and
restrictions that apply to it at the moment," Lagarde told the
bank's post-policy meeting news conference.
    That projection also explained why the ECB had extended its
Pandemic Emergency Purchase Programme by nine months to March
2022, she said.
    The ECB's updated forecasts see inflation next year at 1%,
unchanged from its last projection, while in 2022, inflation is
seen at 1.1% against 1.3% seen three months ago. In the bank's
initial projection for 2023, inflation is expected to rise to
1.4%, still well short of the ECB's target of almost 2%. 
    Lagarde said risks to the euro zone economy remained tilted
to the downside but had become less pronounced.  
    The following are the ECB's quarterly growth and inflation
projections through 2023. Figures in brackets are the ECB's
previous forecasts from September. For 2023, the ECB is
providing forecasts for the first time. 

                2020            2021           2022        2023
GDP growth  -7.3%  (-8.0%)   3.9%  (5.0%)   4.2%  (3.2%)    2.1%
Inflation    0.2%   (0.3%)   1.0%  (1.0%)   1.1%  (1.3%)    1.4%

 (Reporting by Balazs Koranyi; Editing by Catherine Evans and
John Stonestreet)