Deep recession unavoidable due to coronavirus, German 'wise men' say

Berlin (dpa) - A deep recession in Germany is unavoidable due to the massive consequences of the coronavirus outbreak, a group of economic experts that advises the government said on Monday.

The country's economy will contract significantly this year, the German Council of Economic Experts predicted in a special report. How bad it will be remains unclear because of the great uncertainty that still prevails.

What will be "crucial" for the economy is the spread of the virus being contained and the restrictions on social and economic activities being lifted rapidly, the so-called "wise men" wrote.
The group presented three possible scenarios.
"In all three scenarios, the spread of the coronavirus abruptly ends the emerging economic recovery, so that a recession in the first half of 2020 will be unavoidable in Germany," the council said in a statement.
It thinks the most likely scenario is that the economic situation will normalize over the summer - which runs from June to September in Europe - so that Germany's gross domestic product (GDP) will end up falling by 2.8 per cent this year.
During the global financial crisis in 2009, by comparison, Europe's largest economy collapsed by 5.7 per cent.
The council's two more pessimistic scenarios foresee a deeper slump in 2020, possibly followed by a very slow recovery. This could happen if the health restrictions remain in place beyond the summer and the economic recovery only sets in next year.
"In this risk scenario, the policy measures taken may not be enough to prevent far-reaching damage to the economy," the council said - leading to a 4.5-per-cent decline in gross domestic product this year and growth of only 1 per cent in 2021.

Monday, March 30th 2020

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