Europe’s largest economy is set to continue recovering from the coronavirus crisis in the remainder of 2020 and will likely grow strongly in the third quarter but it probably will not reach its pre-crisis level until 2022, the German Economy Ministry said.
The trough of the recession was reached in the second quarter and the easing of lockdown measures since May led to a rapid recovery in industry and in some service sectors, the ministry said in its monthly report on Monday, adding that the revival has lost some steam lately though.
“The German economy is continuing to pick up, albeit at a more moderate pace,” the ministry said.
Economists expect Europe’s biggest economy to show a return to growth in the third quarter after a record 9.7% contraction in the second quarter as consumer spending, company investment and exports all collapsed.
The ministry said significant economic growth was likely in the third quarter thanks to impetus from May and June, when there were signs of a rebound.
It said exports remained far from their pre-coronavirus levels and while industrial production had returned to almost 90% of its pre-coronavirus level and was continuing to rise, it had lost some momentum.
Earlier this month, the German government revised upward its economic forecast for this year to a decline of 5.8% from a previously expected slump of 6.3%.
A temporary cut in Germany’s value-added tax (VAT) as part of the government’s stimulus package and a child bonus are also expected to boost domestic demand in the second half of the year, it added.
Reporting by Riham Alkousaa; Editing by Michelle Adair