Germany’s economy likely to shrink by 6.6% this year - ifo Institute

According to the  ifo Economic Forecast 2020 Update, the German economy will probably shrink by 6.6 percent this year and then grow from this low level by 10.2 percent next year, according to the updated ifo Economic Forecast for 2020/2021. 

“This is based on our evaluation of the ifo survey conducted among companies in May. On average, participants consider it most likely that their own business situation will return to normal in nine months,” says Timo Wollmershaeuser, Head of Forecasts at ifo.

“This means that, after a sharp slump of 12.4 percent in the second quarter of 2020, the economy ought to recover by the middle of next year. Only then will production of goods and services attain the level it would have reached without the coronavirus crisis,” Wollmershaeuser adds.

However, the forecast depends heavily on how quickly companies’ business situation returns to normal. In the best case, companies indicate that this might take an average of only five months. Economic output would then shrink by only 3.9 percent this year, with growth next year reaching 7.4 percent. In the worst case, with an average normalization period of 16 months, economic output would shrink by 9.3 percent this year and grow by 9.5 percent next year. The recovery would then be drawn out well into 2022.