Source: Xinhua| 2020-09-22 19:08:10|Editor: huaxia

Germany's economic downturn was less severe than expected as the country's gross domestic product (GDP) was anticipated to only shrink by 5.2 percent this year, not 6.7 percent as previously expected, the ifo Institute announced on Tuesday.

"The second-quarter decline was smaller than we had feared and the current recovery is proceeding better than we had expected," said Timo Wollmershaeuser, head of forecasts at ifo.

"However, the pace of recovery is likely to slow down noticeably in the further course of the year," because certain services related to consumer spending remained limited due to COVID-19 restrictions as well as "permanent changes in the behavior of consumers and companies," ifo noted.

At the assumed rate of recovery, Germany's GDP would "not reach its pre-crisis level until the fourth quarter of 2021." For the next year, ifo is expecting a GDP growth of 5.1 percent.

The autumn forecast by the German Economic Institute (IW) published last week was more pessimistic and assumed GDP to decline by almost 6.25 percent in 2020 and to grow by only around 4.5 percent in 2021.

However, IW noted that many major economies had seen a "pronounced economic recovery", especially in China, during the summer months.

The German government surplus of 52.5 billion euros (61.7 billion U.S. dollars) in 2019 would plunge to minus 170.6 billion euros this year "in response to falling revenue and a drastic rise in expenditure to support the economy," ifo noted.

In order to stimulate private consumption and mitigate the economic effects of the COVID-19 pandemic, the German government passed an economic stimulus package worth 130 billion euros in June, including a temporary reduction of value-added tax (VAT) from 19 to 16 percent.

Germany's "much criticized current account surplus" from exports, imports, services and transfers would fall from 244 billion euros in 2019 to 215.4 billion euros this year. According to ifo, exports would decline much faster than imports in 2020.

In its recent report about the economic situation in September, the Ministry for Economic Affairs and Energy noted that the outlook for German foreign trade provided reason for "cautious optimism."

In the wake of the recovery in production and demand following the easing of COVID-19 restrictions in Germany as well as in other countries, exports and imports were also beginning to catch up. "This process should continue in the further course of the year," the ministry noted. (1 euro = 1.18 U.S. dollars)