BERLIN – Germany’s economy, Europe’s largest, will probably shrink by 9.8 per cent in the second quarter, its biggest decline since records began in 1970, due to measures imposed to slow the spread of the novel coronavirus, the country’s leading think tanks said on Wednesday.
That would be more than double the drop seen in the first quarter of 2009, during the global financial crisis, the economic institutes said.
Germany has been in virtual lockdown for several weeks. Schools, shops, restaurants, sports facilities and other non-essential businesses have closed and many companies have halted production to help slow the spread of the disease.
“It is not unlikely that the crisis will drag on longer than expected and lead to production being frozen,” said Timo Wollmershaeuser, an economist at the Ifo institute, one of the think tanks involved in producing the report.
“In this scenario the recession will be deeper and the recovery will be slower. It will also be more difficult for the government to prevent businesses from going bankrupt,” he added.
A survey of German companies by the DIHK Chambers of Industry and Commerce showed that four in five expect their revenues will shrink in 2020, and a quarter said business would fall by more than 50 per cent. About 18 per cent said they are threatened with insolvency.
The research institutes said the economy probably shrank by 1.9 per cent from January to March. As Reuters previously reported, they said the German economy is likely to shrink by 4.2 per cent this year and grow by 5.8 per cent next year.
“The coronavirus pandemic is triggering a deep recession in Germany,” said the institutes, whose forecasts form the basis of the government’s own economic predictions. They said there was a significant downside risk to their predictions.
The German government is due to present its own economic forecasts on April 29. (Reuters)
