Austrian economy to shrink 3.2% in 'moderate' coronavirus scenario - ONB

VIENNA (Reuters) - Austria’s economy will shrink 3.2% this year in the case of a “moderate” pandemic scenario, the country’s central bank said on Tuesday, estimating that each week of lockdown cuts annual output by more than $2 billion.

FILE PHOTO: European Central Bank policymaker and Austrian National Bank (OeNB) Governor Robert Holzmann attends a news conference in Vienna, Austria December 2, 2019. REUTERS/Leonhard Foeger/File Photo

The Austrian National Bank (ONB) said the forecast for gross domestic product (GDP) was based on a scenario in which most coronavirus lockdown measures were lifted in the second quarter.

“First estimates by ONB forecasters point to a sharp decline in real GDP in Austria by more than 3% in a moderate COVID-19 scenario,” ONB Governor Robert Holzmann said in a statement.

“Should this assumption not materialise, the forecast would have to be revised downward significantly,” he said, adding that the forecast was subject to a high degree of uncertainty and it was too early to reliably assess the impact of the pandemic.

Austria has closed schools, restaurants, bars, theatres and other gathering places, including non-essential shops. People have been told to stay at home and work from there if possible. Most of those measures are in place until Easter Monday, April 13, and are widely expected to be extended for a long time.

Slides shown at a news conference with Holzmann on Tuesday showed the pandemic would knock 4.4 percentage points off GDP in 2020, which would mean a contraction of 3.2% from 2019.

A budget deficit of 5.4% of GDP was also forecast as the country is making billions of euros available in economic aid.

Economic think-tank Wifo, which compiles GDP data for the government, last week predicted a 2.5% fall in GDP if lockdown measures were eased in May and the situation returns to normal in the summer.

Each week of lockdown costs the economy 0.53% of yearly GDP, or 2.1 billion euros ($2.3 billion), a line in Holzmann’s slide presentation showed.

Holzmann said the ONB was not able to make a specific inflation forecast but the impact of the pandemic was likely to be negative. The ONB last week revised its inflation forecast down to 1.2% for this year because of the slump in oil prices.

Holzmann also sits on the European Central Bank’s Governing Council. In the statement, the ONB said the outbreak had taken the ECB’s attention away from its ongoing policy review.

“The Eurosystem is currently reviewing its monetary policy strategy. This review process has now somewhat receded to the background as the current problems caused by the corona crisis have taken precedence,” the ONB said.

Reporting by Francois Murphy; Editing by David Clarke