MNI POLICY: GCEE Cuts German 2020 GDP Outlook, Sees 6.5% Fall

By Luke Heighton

     FRANKFURT (MNI) - Germany's economy will decline by 6.5% this year as a

result of the coronavirus pandemic and efforts to contain it, the German Council

of Economic Experts (GCEE) said Tuesday -- 1.1 percentage points lower compared

to its March projections.

     However, following a sharp contraction in H1 2020, the German economy

should begin to pick up again in H2, the Council said, with 4.9% growth expected

through the July to December period -- supporting the theory that Germany will

experience a "pronounced V"-shape recovery.

     GDP is unlikely to return to pre-pandemic levels before 2022, with

unemployment continuing to rise in 2020 before beginning to decline in 2021 from

6.1%. Euro area real GDP is expected to fall by 8.5% this year, before growing

by 6.2% in 2021, the Council said. Globally, the outlook remains subject to

considerable uncertainty.

     Tuesday's projections update those produced by the GCEE in a special March

report into the economic effects of the coronavirus pandemic, which anticipated

a 5.4% contraction in 2020 before returning to 4.9% growth in 2021.

     --RECOVERY

     "Worldwide," the Council reported, "the pandemic has spread more strongly

than initially expected and more extensive containment measures have been taken,

some of which are still in place. However, the reduction in the number of new

infections and the gradual easing of health policy interventions in Germany and

of important trading partners will create the basis for a recovery later this

year. In addition, the adopted stabilisation measures and economic policy

stimuli are expected to have a positive effect."

     "The coronavirus pandemic is forecast to cause the worst economic downturn

since the Federal Republic of Germany was founded," German Council of Economic

Experts chairman Lars Feld said. "However, we expect a recovery to set in from

summer onwards."

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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