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Coronavirus Plunges the German Economy into Recession: DIW Economic Outlook

DIW Weekly Report 12 / 2020, S. 184-190

Claus Michelsen, Marius Clemens, Max Hanisch, Simon Junker, Konstantin A. Kholodilin, Thore Schlaak

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The spread of the coronavirus worldwide is exerting considerable pressure on the economy. Compounded by the lack of quality data, model uncertainty, and uncertainty over government responses, economic forecasts are subject to even greater uncertainty than usual. It is difficult to predict how the pandemic will progress. Figures on the impact of the virus, obtained by comparing it with previous epidemics, for example, provide rough approximations at best. Based on the model calculations, Germany can expect to suffer huge economic losses. Given the information available, it is reasonable to assume that economic output will actually be one percentage point lower than recently projected in the winter outlook. As a result, GDP will decline by 0.1 percent this year. If the higher number of working days this year is factored in, in line with general international practice, economic output will fall by as much as 0.5 percent. The corona pandemic will plunge Germany into recession, albeit the exact size of the downturn remains unclear.

Konstantin A. Kholodilin

Research Associate in the Macroeconomics Department

JEL-Classification: E32;E66;F01
Keywords: Business cycle forecast, ecoomic outlook

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