German business confidence rises

Economy won’t fully rebound before 2022: experts

BERLIN, June 24, (AP): German business confidence has risen for the second consecutive month, a closely watched survey showed Wednesday. The result was slightly better than economists’ expectations.

The Ifo institute said its monthly confidence index rose to 86.2 points in June from 79.7 in May. Economists had forecast an increase to 85. Managers’ assessment of both their current situation and, in particular, the outlook for the next six months brightened.

The Ifo said it was the strongest monthly increase it has ever recorded and “German business sees light at the end of the tunnel.”

The German economy, Europe’s biggest, went into a recession in the first quarter that is expected to deepen in the current quarter. A panel of economic experts that advises the government said Tuesday that output won’t completely bounce back to pre-virus levels until 2022 after a sharp plunge of 6.5% this year.

However, the government is seeking to boost the economy with a 130 billion-euro ($147 billion) stimulus package, including a six-month cut in value-added tax that takes effect next week.

Germany started loosening restrictions imposed to curb the coronavirus pandemic in late April and that process has gathered pace since, despite some concern over local outbreaks.

The Ifo index is based on monthly responses from managers at about 9,000 companies.

German economic experts say output won’t completely bounce back to pre-virus levels until 2022 after a sharp plunge of 6.5% this year, describing the pandemic recession and recovery as taking the shape of a “pronounced V.”

The five-member German Council of Economic Experts said Tuesday the economy would see an upswing in the second half of this year followed by more moderate growth reaching 4.9% next year. It said unemployment would continue to rise this year before falling gradually next year.

The experts said recent economic data had made clearer the the impact of the widespread restrictions on travel, business and interpersonal contact. Those restrictions hit hardest in April and are being gradually loosened as the number of new infections has fallen.

Germany would be held back by the global slowdown since it is a major exporter, they said.

They also took a downbeat view of the overall economy in the 19 countries that use the euro, foreseeing a drop of 8.5% this year. That is somewhat steeper than the 7.75% fall predicted by the European Union’s executive commission.