German Economy May Shrink By Over 9% in 2020 Due To Pandemic

By Staff, Agencies

Germany’s economy, Europe’s biggest one, may decline by 9.3% in 2020, according to the worst-case scenario outlined by one of the country’s largest economic think tanks, the ifo Institute.

The Munich-based institute presented three possible scenarios in its latest economic forecast update on Thursday. Based on a survey conducted among companies in May, it could take them nine months on average to get back to normal after the severe second-quarter lockdowns. In this case, the country’s economy could shrink by 6.6% this year and then recover from this level by 10.2% next year.

However, the worst-case recovery would take significantly longer, up to 16 months, with economic output shrinking by 9.3% this year. According to this scenario, next year’s growth will just slightly compensate for the losses, and the recovery “would then be drawn out well into 2022.”

The quickest possible return to normal would be after five months on average, resulting in a 3.9% decline in economic output.

Even the ifo Institute’s average forecast shows that the coronavirus crisis could plunge Germany into the deepest recession since the end of WW2. The think tank’s projections are not much gloomier than the Economy Ministry’s outlook, which predicts the German economy will shrink by 6.3% in 2020.

The coronavirus pandemic has already halted the country’s decade-long economic growth. In the first three months of the year, Germany’s economy has shrunk by 2.2% compared to the last quarter of 2019. This was the second quarterly contraction, meaning that the German economy has technically fallen into recession.