The European Central Bank maintains optimistic expectations about the euro zone economy, provided the isolation measures are lifted


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FRANKFURT / BRUSSELS – Reuters: Christine Lagarde, President of the European Central Bank, said on Wednesday that the eurozone economy is still recovering this year, provided that the general isolation measures taken to confront the Corona pandemic are lifted at the end of March and the vaccines are distributed.
Last month, the European Central Bank predicted economic growth of 3.9 percent this year in the euro zone, which includes 19 countries, assuming a gradual end to the pandemic.
But the increase in cases of Covid-19 disease again, the widespread and increasing restrictions on movement and activity in countries including Germany and France, as well as the slow pace of the distribution of vaccines, pose a challenge to expectations only two weeks after the start of 2021.
Lagarde stuck to yesterday’s ECB forecast, although she said the bank had included some restrictions. She added during an interview at the “Reuters Next” virtual conference, “I think that our latest forecast in December is still very reasonable. Our expectations that the general isolation measures will continue until the end of the first quarter.”
The European Central Bank said on December 10 that it expects to achieve “adequate” levels of herd immunity before the end of 2021.
Lagarde acknowledged that early vaccinations are “arduous” and that they are a risk factor that must be monitored.
To support the eurozone, the central bank has already extended its tightly accommodating monetary policy until 2022. But with borrowing costs reaching record lows and entering negative territory in some eurozone countries, its remaining stimulus tools are limited.
On the other hand, Francois Villeroy de Gallo, a senior official at the European Central Bank, said yesterday that the bank is closely following developments in exchange rates and their negative impact on inflation.
Although the euro lost some of its gains in recent days, it is trading at its highest levels since the second half of 2018, which hurt the exports of the euro area, but made imports such as oil cheaper, which affected inflation.
“We will keep monetary conditions favorable as long as necessary, and we will closely monitor the negative effects of the euro exchange rate against several currencies on inflation,” Villeroy, who also heads the French central bank, told the French Parliament’s finance committee.
On the other hand, data revealed on Wednesday that industrial production for the eurozone was better than expected in November thanks to the recovery in intermediate and capital goods production, which is a positive indicator for investment later in 2021.
The European Union statistics office (Eurostat) said that industrial production in the euro zone, which includes 19 countries, increased 2.5 percent in November compared to October, while it recorded a decrease of 0.6 percent year-on-year.
Economists polled predicted a modest increase in growth of 0.2 percent on a monthly basis, and a decline of 3.3 percent on an annual basis, as the eurozone economy faces difficulties in the face of a second wave of the Covid-19 pandemic.
The better-than-expected result was mainly due to a seven percent monthly increase in capital goods production and a 1.5 percent monthly increase in intermediate goods production, which contributed to offsetting the decline in energy production and durable and non-durable consumer goods.
On an annual basis, capital goods production increased 0.1 percent in November after declining 8 percent year-on-year in October. Production of intermediate goods increased 1.1 percent, after a 0.9 percent decline in October.


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