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23 March 2020

POLITICO: Coronavirus could slash German economy by over 20 percent

The coronavirus crisis could cause the German economy to shrink by up to 20.6 percent this year, draining hundreds of billions of euros from the public budget, the Munich-based Ifo Institute said.

"The costs are expected to exceed anything known in Germany, from economic crises to natural disasters in recent decades," Ifo's President Clemens Fuest said.

Depending on the length of the disruption, the institute estimates the losses will range from 7.2 percent for a two-month period to 20.6 percent under a worst-case scenario for a three-month outage. The institute estimates the economic cost of that would stretch from between €255 billion to €729 billion.

Major companies including Volkswagen and BMW have announced plant closures as part of efforts to halt the spread of the virus, while shutdowns have curtailed consumer demand.

The institute's best-case scenario is that output dips to 60 percent for two months, before jumping up to 80 percent in the third month and back to normal in the fourth. This assumes the spread of the coronavirus can be curtailed by mid-summer.

The crisis will also blow a €200 billion hole in the public budget, though that does not consider the boon from economic rescue packages. Some 1.8 million workers could lose their jobs, the Ifo said. [...]

Full article on POLITICO

Ifo Institute study 


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