2020 Universal registration document and annual financial report - BNP PARIBAS196
4 Consolidated finanCial statements for the year ended 31 deCemBer 2020
4
Notes to the financial statements
The graph below presents a comparison between GDP projections used in the baseline scenario for the calculation of ECLs as at 31 December 2019 and 31 December 2020.
80
85
90
95
100
105
Central scenario at 31 December 2020Central scenario at 31 December 2019
G DP
in de
x
Dec-22Dec-21Dec-20Dec-19Dec-18
Return to the 4th quarter 2019 level of GDP:
31 December 2020
France 4th quarter 2022
Italy 4th quarter 2023
Belgium 4th quarter 2022
Germany 2nd quarter 2022
Eurozone 3rd quarter 2022
United States 4th quarter 2021
These assumptions are close to the European Central Bank s scenario of December 2020 for the eurozone, which also assumes a return to pre-crisis GDP level in the third quarter of 2022.
Adverse Scenario The adverse scenario supposes the materialisation of certain risks for the economy, resulting in a much less favourable economic path than in the baseline scenario.
In the current context, the dominant risk is that the health crisis does not vanish as smoothly as expected in the baseline scenario and that the economy weakens again.
Two main developments could lead to this negative outcome: a) a less favourable health crisis evolution than expected; b) a more severe economic fallout than assumed (e.g. higher unemployment and bankruptcy).
Beyond this dominant risk, the following risks appear strengthened in the context of the health crisis:
■ Extended crisis due to weaker demand: the health crisis could trigger a more classic , and therefore longer crisis, if it results in significant damage to the economy (e.g. higher unemployment rate, higher
number of bankruptcies, etc.) which significantly affect domestic demand. This could notably occur when governments reduce or stop to fiscal measures aimed at helping households and businesses during the crisis (e.g. job retention schemes, extended unemployment benefits, State-guaranteed loans), or if certain key sectors for a given region or country are severely impacted by the crisis (e.g. foreign tourism).
■ Pressure on financial institutions profitability: the health crisis leads to an increase in the number of borrowers in greater difficulty when it comes to repaying their debt, especially with the withdrawal or scaling back of government support measures. In addition, possible financial turbulences and extremely low interest rates might weigh on banking profitability.
■ New financial market corrections: the health crisis has already had a major impact on the value of certain financial assets. Depending on how the health crisis evolves, additional corrections could affect some markets.
■ Tensions related to public finances: given the extent of the contraction in activity and the amount of fiscal support that will be provided by governments to compensate for this major shock, debt-to-GDP ratios are bound to increase substantially in some countries and reach
➤ EUROZONE GDP: INDEX BASE 100 AT THE FOURTH QUARTER OF 2019
