Germany currently expects the economic impact of the COVID-19 pandemic to be less severe this year than originally feared, yet there are still fears of a sluggish foreign demand weakening the recovery of Europe’s largest economy next year.
During the presentation of the German government’s updated forecasts on Tuesday, Economy Minister Peter Altmaier stated that a strong response from the government has helped the economy to recover in a much faster manner than was initially expected from the coronavirus pandemic.
Altmaier told reporters that “The recession in the first half of the year turned out to be less severe than we had feared”.
He added that “Overall, we can say that at least for now, we are dealing with a V-shaped development”.
Adding to this, Altmaier claimed that he did not expect the government to impose another set of lockdown measures as was done during March and April.
After plenty of discussions, the Economic Ministry positively revised its 2020 forecast, from its previous estimate of a decline of 6.3% to a decline of 5.8%, a significant improvement.
However, if a 5.8% decline takes place, it will still be Germany’ largest economic contraction since World War Two, even being higher than the 5.7% contraction in 2009 during the global financial crisis.
Additionally, the government also revised its growth forecast for 2021, claiming that the economy would grow by 4.4%, which is lower than the previous estimate of 5.2%.
These statistics show that the German economy will not be able to reach its pre-pandemic size before early 2022, according to Altmaier.
This is worsened by the fact that the government expects its exports to fall by 12.1% in 2020, and then increasing by 8.8% in 2021.
The same trend is followed when it comes to private consumption, with this falling by 6.9% in 2020 this year, and then increasing by 4.7% in 2021.
The economy had contracted by a record 9.7% during the second quarter, with consumer spending, company investment and exports all falling massively.
However, the German economy did fare better than most of the other eurozone economies, with the French economy contracting by 13.8% from quarter to quarter during April-June, whilst Italy’s economy also contracted by 12.8%.