German economy could shrink more this year than in 2008/9 crisis: minister

German economy could shrink more this year than in 2008/9 crisis: minister

© Reuters. The spread of the coronavirus disease (COVID-19) in Berlin

By Michelle Martin and Thomas Escritt

BERLIN (Reuters) – Europe’s largest economy might shrink more this year than during the 2008/9 financial crisis, German Economy Minister Peter Altmaier said on Thursday, adding that contractions of more than 8% might be registered in some months as coronavirus bites.

Germany is in virtual lockdown, with more than 73,000 people infected and 872 deaths from the pandemic. Schools, shops, restaurants and sports facilities have closed and many firms have stopped production to help slow the spread of the disease.

Altmaier said the economy had fared well during the first two months of the year – before Germany went into virtual lockdown in March – and said the virus would take a heavy toll on the economy in April before probably reaching its peak in May.

“We expect that in individual months in the first half, the economy could shrink by more than 8%,” he said.

Earlier on Thursday the KfW state development bank said the German economy was likely to shrink by 10-15% in the second quarter.

“The declines I’ve talked about will probably be at least as bad, if not even worse than with the banking and stock market crisis of 2008/2009,” Altmaier said, without giving an exact prediction.

The German economy shrank by 5.7% in 2009.

“This means that after 10 good years of economic growth, we’ll have a recession again this year for the first time since 2009,” Altmaier added.

If there is a stabilisation over the course of the year – and hopes of that remain justified – the balance at the end of the year would be bad “but perhaps not as bad as some people currently fear”, Altmaier said.

The influential Ifo Institute for Economic Research has said output could decline by as much as 20% this year, with the German Economic Institute saying it could shrink by 10%. A panel of economists that advises the government on Monday said the economy could contract by up to 5.4% this year.

Parliament suspended Germany’s constitutionally enshrined debt brake last week and approved a stimulus package worth more than 750 billion euros ($817.43 billion) to help cope with the economic fallout and around 470,000 companies in Germany have applied for a government short-time work scheme in March due to coronavirus.

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