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Germany raises GDP outlook for 2020 to minus 5.8 pct

Christian Fernsby ▼ | September 2, 2020
The German government raised its official economic forecast but still expects a 5.8 percent decline in gross domestic product (GDP) in 2020 due to the sharp downturn in the first half of the year, Federal Minister for Economic Affairs Peter Altmaier announced on Tuesday.
Germany street
Raises   Germany street
"Due to the coronavirus pandemic, the German economy has experienced its most severe slump in the post-war period," said a statement from the Ministry of Economic Affairs (BMWi).

Topics: Germany

In the previous economic forecast in late April, the government had even assumed a GDP slump of 6.3 percent this year.

"The recession in the first half of the year was less severe than we had to fear," Altmaier said at a press conference in Berlin. The economic upturn was "faster and more dynamic" than expected.

In the second quarter, German GDP had fallen by 9.7 percent compared with the previous quarter. According to BMWi, however, the low point of the recession in Germany had already passed in May.

"The catch-up process of the economy after the lockdown in spring has begun and underlines the strength and resilience of companies in Germany and the high motivation of the employees," Altmaier said.

For the coming year, the government is expecting GDP to grow by 4.4 percent "in view of the emerging catch-up process." In its spring forecast in April, however, the government had still assumed a plus of 5.2 percent in 2021.

Rising infection rates would be countered by targeted and regionally restricted measures, Altmaier said. This would allow the economic recovery in Germany to continue to develop gradually in the coming months. "I am convinced that we can and will prevent a second lockdown."

Various monthly indicators recently showed "clear signs of recovery," the BMWi said in the statement. For example, the Ifo business climate index in August, an important early indicator for the development of the German economy, rose for the fourth month in a row.

Also, employment numbers in Germany were rising for the first time since the start of the pandemic, the Federal Statistical Office (Destatis) announced on Tuesday. The number of people in employment in July increased by 0.1 percent compared to the previous month.

"I dare to forecast that we will have reached the pre-crisis level of gross domestic product again in 2022," Altmaier said.

Despite the recovery and the raised economic forecast, the Federation of German Industries (BDI) warned that the "situation of the German economy remained serious."

In order to have a stable industry after COVID-19, Germany would need to strengthen its competitiveness, suggested BDI Director General Joachim Lang.

With regards to corporate taxes, infrastructure and energy costs, Germany had "a lot of room for improvement in international comparison," he added.