"The sudden and deep recession triggered by the outbreak of the coronavirus (COVID-19) has warranted adjusting the standard tools used for forecasting euro area real GDP growth in real time. The severe economic consequences of COVID-19 have played havoc with established statistical and economic relationships.[1] Hence, standard short-term forecasting models have been able to capture neither the extent of the contraction observed in the first two quarters of 2020 – with quarter-on-quarter declines of 3.7% and 11.7% in the first and the second quarters, respectively – nor the rebound in the third quarter – with an increase of 12.5%. These exceptional dynamics have required an update of the set of tools typically used to forecast euro area real GDP growth in real time. This box describes four approaches developed by ECB staff to account for the specific characteristics and implications of the COVID-19 pandemic..."

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