August 8, 2020

The Kiel Institute predicts that the German GDP will fall 0.1% in 2020 due to the corovavirus

The World Economic Institute (IfW) in Kiel, one of the main in Germany, foresees a “harsh economic recession” in the country in 2020, an exercise in which the gross domestic product (GDP) could fall 0.1% , due to the impact of the coronavirus, followed by a strong recovery in 2021.

The IfW indicates that this conjunctural “V-effect” will occur not only in Germany, but in the whole of the European economies and in the world, adding that the country’s public accounts will still be slightly positive in 2020, but will show a balance something negative next year.

The institute cites the pandemic as the reason for the interruption of the recovery in activity that had been registered in Germany and that “they will cost more than one percentage point of economic production this year”.

“The industry is falling back into recession. The national economy, which until now has been a pillar of economic development, is also under stress,” explains the IfW.

“The specific economic consequences of the coronavirus are currently difficult to quantify. The forecast is subject to considerable uncertainty and is based on the most likely assumption … that the pandemic will decrease in the middle of the year and that there will be significant economic effects, “says IfW chief economist Stefan Kooths.

The institute expects that GDP will decrease by 0.4% in the first quarter of 2020 and 1% in the second, but adds that in 2021 it expects a recovery and that, after the 0.1% drop in the whole this year, there is a rebound of up to 2.3%.

According to the latest official data, Germany grew 0.6% in 2019, but stagnated in the last quarter of last year; The Government announced in January that it calculated that GDP would grow by 1.1% in 2020.

As a main reason for the expected recession this year, the institute cites “precautionary measures that inhibit part of economic life, as well as the high level of uncertainty about the duration and severity of the pandemic and its consequences.”

“In addition, there are drops in production because intermediate products from Asia are not delivered or are delivered too late,” IfW President Gabriel Felbermayr said in a statement.

The German institute also predicts a recession in the eurozone, which it describes as “inevitable”, and cites Italy in particular, although it does not quantify the effect on the country.

Eurozone GDP “will shrink by 1% this year and rise again by just over 2% next year,” he predicts.


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