MercoPress. South Atlantic News Agency

German economy to shrink 6,6% this year but rebound 10,2% in 2021

In Ifo's worst case, in which a return to normal took 16 months, the economy would shrink 9.3% this year and grow 9.5% in 2021

The German economy is likely to shrink by 6.6% this year as a consequence of the coronavirus pandemic before growing by 10.2% in 2021, the Ifo Institute said on Thursday in its latest update.

On average, businesses expected operations to return to normal in nine months after lockdowns in the second quarter, Ifo said. In that case, the economy would shrink 12.4% in the second quarter of this year.

Recent surveys suggest Europe's largest economy is slowly recovering after economic life was frozen in late March to contain the COVID-19 pandemic, but the latest data underline the unprecedented impact.

In Ifo's worst case, in which a return to normal took 16 months, the economy would shrink 9.3% this year and grow 9.5% in 2021. In the best case, companies would recover in five months, the economy would shrink just 3.9% and expand 7.4% next year.

All three scenarios, based on business sentiment as well as production, turnover and foreign trade data, assumed a gradual relaxation of restrictions from the end of April.

Some businesses were braced for a longer, more painful recovery, however: Aviation expected normalisation to take 16 months. Travel, hospitality and car manufacturing also expected lengthier recoveries.

Construction, until recently relatively resilient in the face of the downturn, will also suffer this year, its industry association said – turnover will stagnate at €135 billion (US$148 billion), the same level as last year, it said – a decline in real terms of 3%.