German economy could contract by 5%-20% this year depending on shutdown

The German economy could contract by between 5 per cent and 20 per cent this year depending on the length of the shutdown caused by the coronavirus outbreak, Ifo economist Klaus Wohlrabe told Reuters on Wednesday.

He said he expected there to be a severe recession in Europe’s largest economy that would last for at least two quarters.

German business confidence collapsed the most in three decades after restrictions to slow the spread of the coronavirus forced mass closures of companies and stores across the German economy. Ifo said the slump is even more pronounced than last week’s preliminary reading suggested and lends credence to predictions that the 19-nation euro area is sliding into its worst recession in history.

“Companies’ expectations in particular have darkened asnever before,” said

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Ifo president Clemens Fuest. "The German economy is in shock." Governments from across Europe are trying to soften the blow with unprecedented fiscal spending. In Germany, chancellor Angela Merkel has lined up a €550 billion public-guarantee programme to keep companies afloat and signed off on an emergency budget that includes another €750 billion of measures. - Reuters/Bloomberg