German economy likely to shrink 6.6 pct in 2020

Source: Xinhua | 2020-05-29

The German economy is likely to shrink 6.6 percent in 2020 before growing from this "low level" by 10.2 percent next year, the ifo Institute forecasted on Thursday.

Ifo Institute expected a "sharp slump" of 12.4 percent in the second quarter of 2020 before an economic recovery would take place by the middle of next year.

"Only then will production of goods and services attain the level it would have reached without the coronavirus crisis," said Timo Wollmershaeuser, head of forecasts at ifo Institute.

The forecast, based on a survey among German companies, would depend heavily on how quickly the business situation of German companies would return to normal, ifo Institute noted.

In the best case, German companies had indicated that this might take an average of only five months. In this scenario, Germany's economic output would only decline by 3.9 percent this year.

"On average, participants consider it most likely that their own business situation will return to normal in nine months," added Wollmershaeuser.

In the worst case, with an average normalization period of 16 months, economic output in Germany would even shrink 9.3 percent this year. According to ifo Institute, the recovery would then be drawn out "well into 2022."

Overall, the business expectations of German companies in all sectors of the economy had "brightened considerably" while the assessment of the companies' current business situation still remained poor, ifo Institute noted.

All scenarios assumed a gradual easing of the lockdown to have had started in Germany at the end of April. According to ifo, average economic output in Germany was likely to have contracted by around 17 percent during the COVID-19 lockdown.