Deutsche Bank ups 2020 GDP outlook on faster COVID-19 recovery

FILE PHOTO: The logo of Deutsche bank is seen in Hong Kong, China July 8, 2019. REUTERS/Tyrone Siu/File Photo

(Reuters) - Deutsche Bank said on Thursday it had revised up its GDP forecasts for 2020, noting that recovery from the coronavirus-induced plunge in economic activity was progressing faster than it had earlier expected.

The biggest revision came in the euro zone where Deutsche now forecasts the economy to contract 8.6% this year compared to the previous expectation of a 12% decline.

“In the Euro-area, the Q2 outcome tells us that activity did not plunge quite as far as feared in lockdown. It also tells us that the post-lockdown rebound was stronger than expected,” the bank said.

It also raised estimates for the global economy by 1.5 percentage points, now predicting it to shrink 4.5% this year.

Deutsche expects the U.S. economy to contract by 5.2% in 2020, versus the previous minus 7.1% forecast. It also seen the world’s biggest economy to grow 3.1% next year, rather than the 2.6% it had earlier predicted.

The German bank’s estimates on inflation were less optimistic, with euro zone price growth in particular coming under downward pressure from recent euro appreciation against the dollar. It does not expect euro area inflation to return to pre-COVID levels until 2025.

“We are not expecting the structural impact of the pandemic outweigh the impact of the large output gap,” the bank’s research note added.

(This story has been refiled to change headline to include reference to GDP)

Reporting by Sujata Rao; editing by Thyagaraju Adinarayan