German economy could shrink by 6% due to coronavirus
US, WASHINGTON (ORDO NEWS) — The German economy may contract in 2020 due to the consequences of the outbreak of the coronavirus, German research institutes Ifo and DIW, as well as analysts at Deutsche Bank, predict.
The head of the influential Institute for Economic Research, University of Munich (Ifo) said on Thursday that the German economy could shrink up to 6% due to the crisis.
“The course of events will largely depend on how the epidemic develops,” Ifo President Clemens Fust said.
“Today we are considering two scenarios. A very, very favorable scenario, which will lead to negative economic growth of 1.5% in 2020, ”he said, adding that the assumption is based on a limited reduction in production.
“We have a second scenario with serious manufacturing constraints - this will lead to a reduction of the economy by 6% in 2020.”
Deutsche Bank lowered its forecast for the German economy due to the spread of coronavirus, saying it now expects the eurozone’s largest economy to contract by 4-5% in 2020, while industrial production could contract by 10%.
“Within a few days, measures to isolate and (temporarily) close the plants reached a level that implies a much larger reduction in the first half than previously thought,” said Deutsche chief economist Stefan Schneider, adding that he had previously expected a reduction in the German economy by 1 -2% this year.
The German Institute for Economic Research DIW expects the German economy to contract by 0.1% this year. At the same time, an outbreak of coronavirus will have a strong impact on the economy for at least the next two quarters.
DIW said its forecast is based on an optimistic V-shaped scenario in which a sharp drop in business activity will be followed by a rapid rise later this year.
However, the recession can be much more severe if the uncertainty among companies and consumers caused by the virus continues, the institute added.
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