Germany in the cards for major economic shrinkage as pandemic continues

Germany in the cards for major economic shrinkage as pandemic continues

Germany is getting closer to recession by the day – positive economic prospects are slim.

At the end of March, we talked about how Germany is under massive economic loss ever since the pandemic started. According to the German Institute for Economic Research (DIW), this is just the beginning of an "almost inevitable" recession. The $831 billion stimulus package approved at the end of March helped fuel the rumors.

This past week more information about the matter surfaced, apparently Germany expects an economic downturn unseen since World War II. Financial institutes declared on Thursday that the economic growth is about to shrink up to 10% between April and June. Even if the economy recovers throughout the year, it won't be enough to compensate for the first half of the year. An overall shrinkage of 4.2% is in sight.

Unemployment will continue to rise, but at a slower pace due to a short-work program which allows companies to reduce the working hours, or to furlough the workers. According to the head of forecasts at the Ifo Institute in Munich, “Germany is in a good position to cope with the economic slump.” The country had a budget surplus before, and it can afford to support small businesses with cheap loans.

Germany30 lost 40% since the pandemic debuted, reaching levels unseen in more than five and a half years. The biggest drop happened on March 16, when it lost 7.1%.

Finally, the government expects economic growth of 5% in 2021 but, for now, this is just a prediction as no one knows how the pandemic will evolve.


Sources: forexlive.com, reuters.com, nytimes.com

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The information presented herein is prepared by CAPEX.com and does not intend to constitute Investment Advice. The information herein is provided as a general marketing communication for information purposes only and as such it has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

Therefore, Key Way Investments Ltd shall not accept any responsibility for any losses of traders due to the use and the content of the information presented herein. Past performance is not a reliable indicator of future results.