- UBS says that a deep recession in Europe is now its base case scenario despite heavy fiscal and monetary stimulus.
- The continent's economy could shrink by as much as 4.5% similar to the global financial crisis in 2008.
- "A European recession appears inevitable - the question is how deep and long it will be," said UBS economists in a research note.
Swiss Investment Bank UBS says that a deep recession in Europe is now its base case scenario despite heavy fiscal and monetary stimulus.
The Swiss bank said that the continent's economy could shrink by as much as 4.5% similar to the global financial crisis in 2008 in a research note. In recent weeks, the European Central Bank (ECB) has pumped €750 billion ($820 billion) into the European economy in a bid to boost countries which have been adversely impacted by coronavirus.
"A European recession appears inevitable - the question is how deep and long it will be," said UBS economists Reinhard Cluse, Felix Huefner, Anna Titareva, and Jennifer Aslin in a research note. Italy, which is in shutdown, and Germany would be the worst hit economies according to UBS's projections.
The bank's base case scenario suggests that: "the shutdown lasts until mid-May, followed by a recovery. But despite heavy stimulus from monetary and fiscal policy, negative secondary effects cannot be avoided, unemployment and bankruptcies will rise over the coming weeks, weighing on household consumption and fixed investment even after the shutdown is over."
Economic damage will be dictated by the length of the shutdown in Europe, with estimates suggesting that the longer the continent is shutdown the deeper the likely recession will be. This would also impact on the strength of a potential bounce back.