BERLIN — Germany will fall into recession this year but the economy will bounce back in 2021 if the coronavirus shutdown is over by the summer, according to the German Council of Economic Experts.
Much of Germany’s industrial base has effectively been placed into stasis by the spread of the coronavirus, with restrictions on travel, and manufacturing facilities closed. The advisory panel, made up of senior economists, said the key prerequisite for a return to normality is stopping the spread of infection, but also that clear communication from the government can ease public fears.
“The uncertainty about future developments is currently very high, especially due to the difficult data situation and the unusual situation,” the council said in its report into the economic impact of the health crisis.
The most likely economic scenario, which would see the economy return to normality over the summer, would mean a 2.8 percent drop in GDP in 2020, followed by up to 3.7 percent growth in 2021 as the economy rebounds, the analysis predicted.
The council welcomed government measures to underwrite the economy with hundreds of billions of euros, but pointed to other possible measures. “The time in which people are at home and not at work can be used for further training that is important for structural change,” the council said, adding that construction projects at schools and on public transport could be sped up while the shutdown continues.
The worst case scenario for the EU’s largest economy would see measures to stop the spread of the coronavirus persist beyond the summer, leading to bankruptcies and mass redundancies that would cause “profound damage.” Such prolonged disruption would undermine consumer confidence, leading to at least a 4.5 percent slump in 2020 and weak growth through 2021 at 1 percent.