German economy likely to shrink 6.6% this year

The German economy is likely to shrink by 6.6% this year as a consequence of the coronavirus crisis before growing by 10.2% in 2021, the Ifo Institute said on Thursday in its latest update.

Ciara Lee reports

The German economy is likely to shrink by 6.6% this year.

That's according to the country's Ifo institute.

In its latest update, it gave three possible scenarios for Europe's largest economy.

Its central forecast sees growth of over ten percent in 2021.

On average, businesses expected operations to return to normal in nine months after unprecedented global restrictions.

A slew of recent surveys suggest the German economy is slowly recovering after being frozen in late March.

The three scenarios were based on business sentiment as well as production, turnover and foreign trade data.

All three assumed a gradual relaxation of restrictions from the end of April.

Under a worst-case scenario, in which a return to normal took 16 months, the economy would shrink 9.3% this year and grow 9.5% the next.

The most benign scenario had companies recovering in five months.

Some businesses are braced for longer, more painful recoveries though.

In particular the aviation sector expects normalisation to take 16 months.

The travel, hospitality and car-making sectors also expect lengthier recovery periods.