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Bundesbank: German economy may shrink 7% in 2020

Bundesbank: German economy may shrink 7% in 2020

The latest estimates by the Bundesbank showed that the German economy may shrink more than 7 percent this year, as the measures imposed to rein in the Covid-19 pandemic hit both consumers and producers.

Europe’s biggest economy may contract 7.1 percent in 2020, despite stimulus plans announced by Chancellor Angela Merkel and the European Central Bank, the Bundesbank predicted.

However, the German central bank projects recovery in 2021 and 2022, where the economy could report a growth of 3.2 percent and 3.8 percent respectively.

A report released today signaled a sharp drop of 25.8 percent in factory orders in April, compared to both prior and expected readings of -15.0 percent and -20.0 percent.

A second wave of coronavirus could yield in a marked drop in output by 10 percent, the Bundesbank highlighted citing the high uncertainty surrounding the current situation.   

With more than 600,000 people losing their jobs, the unemployment rate could climb to 6.7 percent next year from 6.1 percent this year.

As of 08:03 GMT, the euro resumed its rally against the U.S. dollar to hit a peak at 1.1383, which is the highest level since March 10.

Later in the day, the U.S. will release its jobs report for May , where downbeat figures may add more downside pressure to the green currency.

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