Longer German lockdown to weigh on economy but growth seen in Q2 2021

Germany’s extended shutdown to curb the spread of the coronavirus will weigh on Europe’s largest economy but not choke it off, with economic institute Ifo forecasting quarterly growth of 3% in the 2nd quarter.

Chancellor Angela Merkel and the country’s 16 states agreed on Tuesday, January 19, to extend a shutdown until mid-February as Germany, once seen as a role model for fighting the pandemic, struggles with a second wave of infections.

Ifo said gross domestic product (GDP) will likely stagnate in the 1st quarter before growing by 3% quarter-on-quarter in spring.

“Every week with an extended lockdown directly leads to losses in sales, production, and added value,” Ifo economist Timo Wollmershaeuser said.

Commerzbank economist Joerg Kraemer said the lockdown’s impact on retailers and services will likely lead to a GDP contraction of 2% in the current quarter, adding the economy would normally grow by 2% without restrictions on activity.

Last year, Germany’s economy shrank by 5%, less than expected and a smaller contraction than during the global financial crisis, as unprecedented government rescue and stimulus measures helped cushion the shock of the pandemic.

The statistics office on January 29 will publish GDP figures for the 4th quarter, when some lockdown measures had already been implemented.

On Monday, January 18, before the lockdown extension was agreed, the Bundesbank said the economy was managing to stay afloat but could suffer a “sizable setback” if coronavirus curbs were extended again. – Rappler.com