Goldman lowers fourth quarter financial progress outlook in Europe

© Reuters. The financial district with the headquarters of the largest German commercial bank, Deutsche Bank (C), is photographed in Frankfurt in the early evening

LONDON (Reuters) – Goldman Sachs (NYSE 🙂 slashed fourth-quarter economic outlook for Europe on Monday as a surge in COVID-19 cases in some countries in November resulted in partial nationwide lockdowns and a recovery that began in the summer stopped.

British Prime Minister Boris Johnson ordered England back into national lockdown from Thursday as a second wave of infections threatened to overwhelm the healthcare system. The move brought England in line with France and Germany, who imposed nationwide restrictions early last week.

The US investment bank assumes that real gross domestic product (GDP) in the euro area will shrink by 2.3% in the fourth quarter. This is a significant reversal from the earlier forecast of 2.2% growth.

Similarly, the UK’s GDP growth projections have been lowered from 3.6% previously expected to minus 2.4%.

“Looking ahead, we assume that the new restrictions will apply for three months before they will be gradually withdrawn from February,” wrote the economists at Goldman Sachs in a message to customers.

Citi economists, meanwhile, said they expected UK GDP to contract by over 4% between October and December. “Longer national bans cannot be ruled out,” Citi said in a note.

“With virus risk expected to persist through Q2 2021, we expect production to remain more than 11-13% below Q4 2019 levels by then, with local restrictions and an acute behavioral response (alongside Brexit) more permanent effects also increase. “

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