Log in
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 

MarketScreener Homepage  >  News  >  Economy & Forex  >  All News

News : Economy & Forex
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies / ForexCryptocurrenciesEconomic EventsPress releases

German economy could shrink by as much as 20% due to coronavirus - Ifo

share with twitter share with LinkedIn share with facebook
03/25/2020 | 05:59am EDT
Containers are loaded on freight trains at the railroad shunting yard in Maschen near Hamburg

Germany's economy could contract by as much as 20% this year due to the impact of the coronavirus, an Ifo economist said on Wednesday, as German business morale tumbled to its lowest level since the global financial crisis in 2009.

The devastating forecast came as lawmakers were discussing an unprecedented rescue package worth more than 750 billion euros (681 billion pounds) for which the government wants parliament to suspend the constitutionally enshrined debt brake.

The Ifo institute's final survey results showed that its business climate index slumped to 86.1 from 96.0 in February.

"This is the steepest fall recorded since German reunification and the lowest value since July 2009," Ifo President Clemens Fuest said in a statement.

"The German economy is in shock," Fuest said, adding that business expectations in particular had darkened as never before while companies' assessment of their current situation also worsened sharply.

In the services sector, the business climate indicator posted its steepest drop since the data was first collected in 2005, Ifo said.

In manufacturing, the index fell to its lowest level since August 2009, with the sub-index for expectations posting the steepest drop in 70 years of industry surveys.

Ifo economist Klaus Wohlrabe told Reuters that the German economy could contract by between 5% and 20% this year depending on the length of the shutdown caused by the pandemic.

Wohlrabe added he expected there to be a severe recession that would last for at least two quarters.


ING economist Carsten Brzeski said the established term "recession" was inadequate to describe an economy that has come almost to a standstill overnight.

"The longer the lockdown lasts, the more the size of the contraction will resemble numbers normally only seen in emerging economies. Simply unprecedented," Brzeski said.

The German government so far expects gross domestic product to shrink by roughly 5% this year due to the outbreak.

The Ifo figures chimed with IHS Markit's PMI surveys, released on Tuesday, that showed Germany's service sector suffered a record contraction in March, pushing overall business activity to the lowest level since the 2009 crisis.

Finance Minister Olaf Scholz asked lawmakers earlier on Wednesday to suspend the debt brake, which restricts new borrowing to 0.35% of GDP, so the government could fight the coronavirus pandemic with "full force".

The Bundestag lower house is expected to pass the rescue package later on Wednesday, including a debt-financed supplementary budget of 156 billion euros and a stabilisation fund worth 600 billion euros for loans to struggling businesses.

The government may even take direct stakes in companies.

Justice Minister Christine Lambrecht told the Handelsblatt business daily these could be partial or full if needed, to prevent the sell-off or break-up of key companies during the crisis.

By Michael Nienaber and Rene Wagner

Stocks mentioned in the article
ChangeLast1st jan.
ING GROEP N.V. -0.34% 6.427 Delayed Quote.-39.66%
THE GLOBAL LTD. 0.97% 209 End-of-day quote.-55.63%
share with twitter share with LinkedIn share with facebook
Latest news "Economy & Forex"
12:41pBritain will set out further reopening timetable next week
12:35pArgentina bondholder groups ready 'Pac-Man' defences
12:23pFrench finance minister urges Daimler to reconsider plan to sell Hambach site
12:04pEU opens bidding for 1 billion euros from clean technology fund
11:59aNew Ways to Use '529' College-Savings Plans This School Year -- Journal Report
11:50aAnger as Air France cuts jobs despite bailout
11:48aSterling heads for first weekly win against dollar in four
11:43aTsogo Sun to buy additional shares in Hospitality Property Fund
11:29aMajor Qiagen shareholder demands higher bid from Thermo Fisher - source
11:16aNEWS HIGHLIGHTS : Top Financial Services News of the Day
Latest news "Economy & Forex"