Germany will need two years to recoup growth lost in recession, Bundesbank says


Germany’s economy will shrink significantly this year and may need two years to make up the lost ground, its central bank said on Friday, joining a number of forecasters predicting only a slow recovery from a coronavirus-induced recession.

The euro zone’s biggest economy will contract by 7.1% in 2020 based on calendar adjusted figures and 6.8% according to unadjusted data, the Bundesbank said in its biannual projections, days after the government agreed a 130 billion euro stimulus scheme.

The Bundesbank’s projections are now broadly in line with outlooks provided by the government and its Council of Economic Experts, which both predicted a drop in the 6% to 7% range.#

Much of Germany’s economy was shuttered for months amid the pandemic and restrictions are only slowly lifted.

For 2021, adjusted growth is seen at 3.2%, and at 3.8% in 2022, the Bundesbank added.

“Public finances make a significant contribution to stabilisation,” Bundesbank President Jens Weidmann said. “New stimulus is appropriate in the current situation and I have a positive assessment on the government’s economic stimulus programme.”

The Bundesbank’s figures come a day after the European Central Bank downgraded its forecasts for the euro zone, predicting a GDP drop of 8.7% in 2020 as its baseline case and a 12.6% fall in its “severe” scenario.