08.04.202010:48:00UTC+00Economic Institutes Forecast German GDP To Shrink 4.2% In 2020

The German economy is set to enter a recession this year due to the impact of coronavirus, or COVID-19 pandemic, the leading economic research institutes reported Wednesday.

According to the spring report prepared by five leading think-tanks, gross domestic product will fall 1.9 percent in the first quarter of 2020 and 9.8 percent in the second quarter due to the lockdown.

The 9.8 percent decrease would be the strongest fall ever seen since the records began in 1970 and more than twice as large as during the global financial crisis in the first quarter of 2009.

The report was prepared by the DIW in Berlin, the ifo Institute in Munich, the IfW in Kiel, the IWH in Halle and the RWI in Essen.

In 2020, the economy is forecast to contract 4.2 percent before rebounding 5.8 percent next year.

However, Germany is well placed to cope with the economic downturn, think tanks said. Measures taken by the government to mitigate the negative consequences of COVID-19 will lead to a record budget deficit this year.

Gross debt is expected to advance to 70 percent of nominal GDP in 2020.

The recession is clearly leaving its mark on the labor market and the state budget, ifo economic chief Timo Wollmershaeuser, said. The unemployment rate is forecast to rise to 5.9 percent in 2020 and the number of short-time workers to 2.4 million.