ZURICH (MaceNews) – Germany’s Bundesbank, the nation’s central bank, won’t be distributing profits for the first time since 1979 as it increased its provisions for general risks by 2.4 billion euros to 18.8 billion.
The Bank’s model-based assessment had “flagged a considerable increase in risks, with interest rate risk and default risk in the monetary policy portfolio rising, in particular,” according to a statement released by the Bundesbank.
“This greater level of risk provisioning is the main reason why the Bundesbank is posting a balanced annual result for 2020 and not distributing a profit for the first time since 1979,” Bundesbank President Jens Weidmann said at the press conference held on Wednesday to present the annual accounts.
On Economic developments, the Bundesbank is expecting a “marked decline in aggregate economic activity in Germany for the current quarter,” due to measures to contain the second wave of the pandemic, the Bundesbank said.
“Effective vaccines have been developed more swiftly than widely expected. If these are successful in helping to overcome the pandemic, the German economy will see a lasting recovery,” Weidmann said.
Still, there is a “great degree” of uncertainly in the outlook and an increase in demand exceeding normal capacity utilization this year “seems improbable,” according to Weidmann.
Additionally, one-off factors are seen pushing the HICP annual inflation rate to more than 3% temporarily by the end of the year, the Bundesbank said.
“For this reason, our economists are now expecting an annual average rate of inflation in 2021 that is just somewhat higher than their December forecast of 1.8%,” Weidmann noted.
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