German economy heading for deep slump

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The German economy faces a deep recession due to the lockdown in response to the coronavirus pandemic, potentially exceeding by far the 2009 slump caused by the financial crisis, leading economists have predicted. The downturn will also dampen greenhouse gas emissions, though many climate experts have already warned that the expected rebound after the recession and the potential economic stimulus measures risk driving emissions up again strongly in the end.

Economists at the Kiel Institute for the World Economy (IfW) now estimate that the economy could shrink between 4.5 and 9.0 percent in 2020, depending on the duration of the shutdown, according to Clean Energy Wire.

Economists at Deutsche Bank pointed out that unlike in 2009, when the recession mainly affected manufacturers, the services sector is severely hit this time, too. The Leibniz Institute for Economic Research (RWI) meanwhile cut its forecast less drastically, predicting a decline in GDP by 0.8 percent in 2020.

The ifo Economic Institute reported that its widely-watched business climate index, which captures the current sentiment and expectations of German companies, posted its steepest slump since 1991. “The drop in expectations is the single most precipitous in 70 years of industry surveys,” the ifo said. The German Institute for Economic Research (DIW) stressed the extremely high level of uncertainty and called for European coordination of governments’ responses.

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