German GDP predicted to shrink to -2.8 pct in 2020

Source: Xinhua| 2020-03-30 21:23:50|Editor: yhy
Video PlayerClose

BERLIN, March 30 (Xinhua) -- The German Council of Economic Experts (GCEE), the advisory council of the German government, predicted on Monday that the country's gross domestic product (GDP) would shrink to minus 2.8 percent in 2020 due to the coronavirus pandemic.

GCEE considered a normalization of the economic situation over the summer to be the most likely development.

It also predicted that in 2021, catch-up effects and a large carry-over effect could drive GDP growth back to 3.7 percent.

"We assume that the corona pandemic will have a severe impact on the global economy," said the new GCEE chairman Lars Feld.

However, uncertainties about future developments were currently "very high". Therefore, the GCEE presented three scenarios for the German economy in 2020 and 2021.

The second scenario, labelled V, assumed a widespread stoppage of production or restrictive measures remaining in place longer than currently planned, according to GCEE.

In the V-scenario, economic output in Germany in the second quarter could be up to 10 percent lower than the current level. The "sharper downturn in the first half year of 2020 would result in a drop in GDP" of minus 5.4 percent on an annual average, GCEE noted.

As in the first scenario, catch-up effects could ensure a return to economic output that was close to potential in the course of the year. In 2021, the economy would then grow by 4.9 percent. GCEE assumed a large carry-over effect of 1.1 percentage points in the V-scenario.

In the third scenario, labelled U, the "policy measures taken may not be enough to prevent far-reaching damage to the economy resulting from bankruptcies and layoffs," GCEE noted.

In U-scenario, there was a risk of "negative feedback loops" through the financial markets or the banking system and lead to a negative growth rate of 4.5 percent, GCEE noted. Next year, economic output in Germany would only grow at a very slow pace of 1 percent.

"A return to growth depends on containing corona infections so that social and economic life returns to normal," stressed Feld.

KEY WORDS:
EXPLORE XINHUANET
010020070750000000000000011100001389319701