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German Economy to Shrink by 20% Due to Coronavirus Impact


Thu 26 Mar 2020 | 04:09 AM
Taarek Refaat

Head of the German Institute of Economic Research (IFO) Clemens Voest said that the German economy may shrink by up to 20% this year due to the effect of the coronavirus, as corporate sentiment fell to its lowest level since the global financial crisis in 2009.

The pessimistic forecast came at a time when lawmakers were studying an unprecedented bailout program of more than € 750 billion as the government seeks to suspend the upper limit of debt stipulated in the constitution.

Meantime, the final results of the IFO survey showed that its business climate index tumbled to 86.1 from 96.0 last February.

"This is the largest recorded drop since German reunification and the lowest value since the financial crisis in 2009," Voest added.

He said that "the German economy is in a state of shock," adding that business expectations in particular worsened in an unprecedented manner, while companies' assessment of their current situation deteriorated significantly.

In the services sector, the business climate index recorded the largest decline since data collection began in 2005.

Moreover, the manufacturing sector index fell to its lowest level since August 2009, and the sub-index for expectations is expected to post the largest decline in sector surveys in 70 years.

Since the outbreak of the pandemic, and with the Chinese economy beginning to suffer, Germany, especially the auto industry, has lost one of its most important trading partners, China.

Meantime, Germany recorded 37,323 confirmed COVID-19 cases, 2,547 recovered and 206 reported deaths.