BERLIN, Dec 16 — Germany’s Ifo institute expects Europe’s largest economy to recover less strongly than expected next year as a stricter lockdown to contain a second wave of infections in the Covid-19 pandemic holds back consumers and companies.
Chancellor Angela Merkel and state leaders imposed a “lockdown lite” from November 2, under which restaurants and bars were closed but shops and schools were open. From today, stricter measures are in effect that shutter most stores as well as hair salons and other services.
Ifo today cut its gross domestic product (GDP) growth forecast for next year to 4.2 per cent from 5.1 per cent previously. For 2022, Ifo raised its GDP forecast to 2.5 per cent from 1.7 per cent.
“The recovery is being pushed back because of the recent shutdown here and in other countries,” Ifo chief economist Timo Wollmershaeuser said. So the production of goods and services would not reach its pre-crisis level until the end of 2021.
As a result of lockdown measures, Ifo expects the economy to shrink in the final quarter of this year. For 2020 as a whole, it predicts a plunge by 5.1 per cent, unadjusted for calendar effects.
These forecasts include measures under Germany’s “lockdown lite” from November 2, which Ifo assumes will remain in place until end-March, but not the impact of stricter measures in effect from December 16 until at least January 10.
Ifo said it assumes that curbs will gradually be relaxed from April onwards and completely lifted by summer.
The institute expects exports to fall by 9.7 per cent this year and to grow by 8.8 per cent next while it forecasts imports to decline by 8.7 per cent in 2020 and to rise by 6.8 per cent in 2021. Germany’s relatively large current account surplus is expected to increase further.
The Ifo forecasts followed a survey among purchasing managers that showed Germany’s private sector remained resilient in December as manufacturing picked up steam and services partly recovered ahead of the stricter lockdown. — Reuters
