German economic output probably declined by some 20-25% for several weeks due to the coronavirus outbreak, the KfW state development bank said on Tuesday, adding that activity likely reached its trough in April if no second wave comes.
Germany went into lockdown in March to contain coronavirus contagion, with many firms halting production and shops closing. Last week Chancellor Angela Merkel announced steps to ease restrictions but also launched an “emergency brake” mechanism to allow renewed restrictions in case infections pick up again.
“The coronavirus crisis hit Germany like lightning,” KfW chief economist Fritzi Koehler-Geib said.
He said a recovery was likely to start in the second half of the year but the economy would probably only reach its pre-crisis level in autumn 2021.
Ultimately, this will cost Germany 300 billion euros ($324.51 billion) in economic output – an amount similar to the entire gross domestic product of Denmark – KfW said.
With the easing of many restrictions, the economy should at least partially normalise by the summer, KfW said, adding that would result in very strong growth in the third quarter.
KfW said it expected the economy to shrink by 6% this year before expanding by 5% next year. But risks were mainly on the downside, it added, with a possible second infection wave the main danger.