German economy to shrink by 6.6 per cent this year, economists say
Germany’s economy will shrink by 6.6 per cent this year, one of the country’s leading think tanks has predicted, as tumbling global demand amid coronavirus takes a heavy toll on the exporting powerhouse.
The Ifo Institute also said it will take until the end of 2021 for Germany’s output to reach pre-coronavirus.
The analysis comes as Germany, Europe’s biggest economy, lets some shops reopen as part of tentative steps towards a broader easing of coronavirus measures.
Germany has suffered markedly fewer deaths from coronavirus than its European neighbours, with 6,100 compared to more than 20,000 in Italy, Spain, France and the UK.
A lower death toll has let Germany think about reopening its economy earlier than many other European countries. However, the plunge in global demand seen around the world has rocked the country’s export-oriented economy.
Ifo said the country’s car industry had suffered a roughly 40 per cent fall in output in April. Meanwhile, widespread coronavirus lockdowns caused carnage in the domestic economy.
The think tank said GDP will likely fall by 12.2 per cent in the second quarter. It said GDP fell 1.9 per cent in the first quarter on its estimation.
“We will not return to pre-coronavirus conditions until the end of 2021,” said Timo Wollmershaeuser, head of forecasts at Ifo.
“Only then will production of goods and services attain the level it would have reached without the coronavirus crisis. To achieve this, GDP must grow by 8.5 percent in 2021.”
A return to pre-coronavirus production by the end of 2021 is more optimistic than predictions for some other countries. For example, forecaster EY Item Club yesterday said it would take three years for UK GDP to recover.
Ifo said its predictions were based on an assumption that the spread of coronavirus “can be contained and a second wave of infection avoided”.
It added that the economy could fare much worse if Germany and its “sales and procurement markets experience a wave of insolvencies leading to distortions in the financial system and requiring a realignment of global value chains”.