For unemployment, the baseline scenario predicts its rate to be 11.5% this year, 10.4% in 2024 and 9.4% in 2025 – What is forecast for inflation
Growth of 1.5% this year (compared to 0.5% in the EU on average), 3% in 2024 (compared to 1.9% in the EU) and 2.8% in 2025, predicts the baseline scenario that will take into account to her the ECB and the European Banking Authority in the simulation tests of the banks in extreme conditions (stress tests) that they will carry out, together this year, in 99 credit institutions of the eurozone.
The unfavorable scenario predicts a 1.9% decline in GDP this year and a 4.5% decrease in 2024, while a marginal increase of 0.9% is predicted in 2025.
For unemployment, the basic scenario predicts its rate to be 11.5% this year, 10.4% in 2024 and 9.4% in 2025. The unfavorable scenario correspondingly predicts an increase to 12.7% in 2023, the 2024 to 16.1% and to 17.3% in 2025.
For real estate prices, the basic scenario foresees an increase of 4.7% for this year compared to an increase of 1.5% in the EU, 3.4% in 2024 (1.6% in the EU on average) and 3% in 2025 ( compared to 2% on average in the EU). The unfavorable scenario predicts a 2.1% decrease this year, -7% in 2024 and an increase of 2.9% in 2025.
Finally, regarding inflationthe basic scenario predicts that this year it will be 5.8% to decrease to 3.6% in 2024 and to 2.5% in 2025. Based on the unfavorable scenario, inflation remains at 8.3% this year and is set at 4 .6% in 2024 and 3.2% in 2025.
As for the stress test process, as the ECB’s supervisory arm ESM announced a while ago, ECB supervisors will examine 57 of the largest banks in the euro area, which were chosen to broadly cover 75% of of the region’s banking assets, as part of the 2023 EU-wide stress test coordinated by the European Banking Authority (EBA). At the same time, the ECB will carry out its own stress test for another 42 medium-sized banks that are not included in the EBA stress test sample due to their smaller size.
The EBA will coordinate the EU-wide stress test in cooperation with the ECB and national supervisors, who will carry it out using the EBA’s stress testing methodology and standards EFTA, as well as the scenarios provided by the European Systemic Risk Board (ESRB). The EBA plans to publish the results for individual banks by the end of July 2023. The results will shed light on the impact of adverse shocks on banks’ resilience under difficult macroeconomic conditions.
In the 2023 exercise, banks will use defined parameters for net fee income for the first time. Another innovation is that banks will report their forecasts of expected losses at the sector level based on the sector-specific projections in the scenarios. In addition, as part of data quality assurance, the ECB will carry out an exhaustive investigation of leveraged exposures for selected banks with material leveraged financing activities.
The ECB’s stress test for the 42 banks outside the EBA sample will be broadly in line with the EBA’s EU-wide stress test, applying the same scenarios as well as elements of the EBA’s methodology in accordance with a proportionality criterion which should take into account the overall smaller size and less complexity of these banks.
The results of the stress tests will be used to update each bank’s Pillar 2 Guidance under the Supervisory Review and Evaluation Process (SREP).
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