Coronavirus: German economy could shrink almost 10 per cent in second quarter
The German economy is set to shrink at the fastest rate since at least 1970 in the second quarter as coronavirus containment measures cause a deep recession, some of the countries top think tanks have said.
German GDP will fall by 9.8 per cent in the second quarter of the year, the biannual joint economic report from five think tanks has said. This would be more than twice as steep as the fall in early 2009 amid the financial crisis.
The German economy contracted by 1.9 per cent in the first quarter alone, the report predicted. Overall, it said, German GDP will fall by 4.2 per cent in 2020.
It comes as the number of daily new coronavirus cases in Germany slows. This has led to hopes that lockdown restrictions could be loosened, reviving the economy.
Yet the World Health Organization today said the outbreak is “very concerning” in Europe. It said there is still “a long way to go” in tackling the virus.
“The recession is leaving very clear marks on the labour market and the government budget,” says Timo Wollmershauser, head of forecasts at Ifo, one of the institutes that compiled the report.
“At its peak, the unemployment rate will jump to 5.9 percent this year and the ranks of short-time workers will swell to 2.4 million,” he said.
The German government has unveiled a raft of stimulus measures to support the economy, blowing apart its treasured rules about having a balanced budget.
One of the schemes it will rely on is “short-time working”, where the government supports workers as they work fewer hours for companies that would otherwise lay them off.
Wollmershauser said: “Germany is in a good position to cope with the economic slump and to return in the medium term to the economic level that it would have reached without the crisis.”
The German economy will rebound and grow 5.8 per cent in 2021, predicted the report, which was compiled by DIW Berlin, Ifo, IFW Kiel, IWH and RWI.