Business Maverick

Business Maverick

Germany Expects 2020 Contraction Won’t Be as Deep as Feared

A waiter wipes a table on a cafe terrace in Berlin on Aug. 24.

The German government expects the economic fallout from the coronavirus will be smaller than expected this year, according to a person familiar with updated forecasts to be published Tuesday.

Chancellor Angela Merkel’s ruling coalition predicted in April that the economy would contract by 6.3% in 2020, its worst recession since the nation began a recovery after World War II, before rebounding with growth of 5.2% next year. Economy Minister Peter Altmaier is due to present the new forecasts on Tuesday at 11 a.m. in Berlin.

Activity in Europe’s biggest economy has staged a strong rebound after collapsing in the second quarter, and German companies turned slightly more optimistic this month that the economy will continue on its long road to recovery.

Read more: Merkel Warns of Long Road Ahead in Europe’s Virus Crisis

To soften the blow from the pandemic, Merkel’s government suspended constitutional debt limits as part of a massive stimulus program. However, Finance Minister Olaf Scholz has said he doesn’t expect gross domestic product to reach pre-crisis levels before late 2021 at the earliest.

Infections are on the rise again after the summer holiday season, stoking fears of a new round of lockdowns that could plunge economies across Europe back into recession.

The German government will revise up its forecast for 2020 gross domestic product to a decline of less than 6%, Reuters reported earlier on Monday, without identifying the source of its information. It will also revise down its growth prediction for next year, the report said.

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