In the report “The Economic Outlook in the Coronavirus Pandemic”, the German Council of Economic Experts (GCEE) presented three scenarios for the German economy in 2020 and 2021 due to coronavirus pandemic.
In the “baseline scenario”, economic situation will “normalize over the summer”. GDP would contract by -2.8% in 2020. GDP growth would bounce back to 3.7% in 2021, driven by catch-up effects and a large carry-over effect.
In the “risk scenario (pronounced V)”, “widespread stoppage of production” or “restrictive measures” would remain in place longer than planned. GDP could contract -5.4% annualized in H1. In 2021, growth could bounce back to 4.9% with “large carry-over effect of 1.1 percentage points”.
In the “risk scenario (long U)”, coronavirus containment would “last beyond the summer” and “delay economic recovery until 2021”. Policy measures may not be enough to prevent “far-reaching damage” to the economy. Ultimately, there is a risk of “negative feedback loops” through the financial markets or the banking system. 2020 GDP could shrink -4.5% with a slow recovery of 1.0% in 2021.
