German economy to contract by 6.6% in 2020, chems to recover in nine months

LONDON (ICIS)–The German economy is anticipated to contract by 6.6% in 2020, leading to growth of 10.2% the following year from that lower level, according to analysis from the ifo Institute on Thursday.

The estimate was released in the institute’s updated economic forecast for 2020/21 – following a survey among companies in May – which outlines a 12.4% drop in the second quarter this year and a recovery expected by the middle of 2021.

While services remain more affected by the impact of the pandemic than manufacturing,  the chemicals industry may be one of the slowest to recover, with normalisation in the sector likely to happen in 10 months’ time.

“Participants consider it most likely that their own business situation will return to normal in nine months,” says ifo head of forecasts Timo Wollmershaeuser.

“Only then will production of goods and services attain the level it would have reached without the coronavirus crisis.”

If a recovery is quicker than anticipated, then economic erosion could be limited to 3.9% this year, propelling growth of 7.4% in 2021.

In a worst-case scenario Germany’s economy could shrink by 9.3% in 2020 with growth of 9.5% the following year, leaving a recovery dragging on into 2022.

All evaluations were based on a projection that lockdown measures would be eased gradually from late April with no second wave of infection and using Germany’s economic output data from the first quarter.