Business cycle – Germany is getting off more lightly than feared

Despite the Federal Government’s € 130 billion economic stimulus package, the DIW expects a 8.1% drop in GDP this year. In view of such gloomy prospects, the current economic forecast by the Halle Institute for Economic Research (IWH) makes people sit up and take notice. The IWH researchers estimate that GDP will decrease by “only” 5.1% in 2020.

This would reduce economic activity less than at the height of the financial crisis in 2009. At that time, GDP fell by 5.7%. It was the worst economic downturn since the Federal Republic was founded. The pandemic had hit the German economy hard, but the slump was not as deep as in the other large euro countries, where the number of corona diseases and deaths relative to the population is higher, IWH Vice Oliver Holtemöller justifies the comparatively mild Numbers for Germany.

The IWH forecast is also supported by the current ZEW index, which points upwards for the third time in a row in June. Accordingly, the economic expectations of the capital market experts surveyed by the Mannheim economic researchers rose by 12.4 points to 63.4 points. For the first time since January, the stock marketers also assess the current situation better than in the previous month. The corresponding indicator rose by 10.4 to -83.1 points. Confidence is growing that the bottom will be reached in summer 2020, commented ZEW President Achim Wambach.

The continuing decline in the number of infections and the government stimulus packages are causing Germany to wake up from the corona coma faster than expected. However, the German economy will only really get going when the global economy regains its footing.

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