Thursday , October 22 2020

German recovery loses steam as virus fears rise

Bloomberg

Germany’s economy is losing steam but will do slightly better than government forecasts as fears grow over rising coronavirus infections, according
to the country’ s five leading
research institutes.
Gross domestic product will contract by 5.4% in 2020 and grow 4.7% next year, the experts predicted in their latest bi-annual outlook published on Wednesday. In their spring report, they expected a contraction of 4.2% this year and growth of 5.8% in 2021.
”A good part of the slump from the spring has already been made up, but the remaining catching-up process represents the more arduous journey back to normal,” said Stefan Kooths, economic director of IfW Kiel.
The administration of Chancellor Angela Merkel in early September revised its economic forecast for this year from -6.3% to -5.8% and for next year from 5.2% growth to 4.4%.
New cases in Germany jump to 6,541, close to the levels seen during the peak in the spring, though they fell back again to 4,464 in the 24 hours through Wednesday, according to data from Johns Hopkins University.
“Now we mustn’t get careless, otherwise the rapid upswing will be lost very quickly,” Finance Minister Olaf Scholz said.
Investor confidence in outlook for Germany’s economy has plunged, in a sign of concern that resurgent infections could delay a recovery. A gauge by the ZEW dropped to 56.1 in October from 77.4 in September, below even the most pessimistic estimate in a Bloomberg survey. Industrial output unexpectedly dropped in August.
The development of the pandemic and uncertainty over corporate insolvencies in Germany and abroad are main risks to the forecast, its authors said. On the upside, private savings have increased sharply and “if released more quickly than assumed in the forecast, could translate into a quicker-than-anticipated recovery,” according to the report.
The five institutes that drew up the forecasts are the DIW (Berlin), IWH (Halle), Ifo (Munich), IfW (Kiel) and RWI (Essen). The Zurich-based KOF institute and the IHS institute in Vienna also helped.

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