German businesses don’t see fast recovery

BERLIN • Germany’s economy is likely to shrink by 6.6 per cent this year as businesses expect it will take nine months on average before operations return to normal after the coronavirus, the Ifo Institute said on Thursday.

That would be Germany’s worst economic performance since reunification in 1990.

As the outlook improves next year, Ifo predicts Europe’s biggest economy will grow 10.2 per cent in 2021.

Recent surveys suggest Germany is slowly recovering after economic life was restricted in late March to contain the coronavirus pandemic.

Ifo, however, said some businesses are braced for longer and more painful recoveries.

Travel, hospitality and car manufacturing expected lengthier recoveries, while aviation expects normalization to take 16 months, Ifo’s survey showed.

Ifo expects the economy to shrink 12.4 per cent in the second quarter of 2020 from a year earlier due to the nationwide lockdown.

The forecasts are for Ifo’s most likely scenario.

In its worst case scenario, in which a return to normal took 16 months, the economy would shrink 9.3 per cent this year and grow 9.5 per cent in 2021.

In the best case, companies would recover in five months, the economy would shrink just 3.9 per cent in 2020 and expand 7.4 per cent next year.

All three scenarios, based on business sentiment as well as production, turnover and foreign trade data, assumed a gradual relaxation of restrictions from the end of April. Smaller shops reopened on April 20.