Germany Economic Forecast

Germany Economic Outlook

October 27, 2020

The economy should have emerged from recession in the third quarter. Industrial production swung from contraction in Q2 to expansion in July–August, and private-sector operating conditions improved markedly in the quarter from Q2. Furthermore, consumer sentiment turned noticeably less sour in Q3, which, coupled with falling prices, should have supported private consumption. Meanwhile, turning to Q4, a new round of restrictive measures—including bar and restaurant curfews and limits on social gatherings—announced in mid-October to curb the second wave of Covid-19 infections will likely derail recently regained economic momentum. In other news, the Cabinet approved the 2021 draft budget in late September, which focuses on investment and encompasses new debt of EUR 96 billion to further mitigate the blow dealt by Covid-19. The budget still needs to be approved by parliament.

Germany Economic Growth

Following the historic drop in GDP this year, the economy is forecast to recover strongly next year, although this will be partly due to a supportive base effect. Continued fiscal support and strengthened domestic and external demand should prop up economic activity. That said, lingering uncertainty regarding Covid-19 and Brexit present downside risks. FocusEconomics Consensus Forecast panelists project the economy to grow 4.4% in 2021, which is down 0.1 percentage points from last month, and to increase 2.6% in 2022.

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Germany Facts

Value Change Date
Bond Yield-0.190.41 %Jan 01
Exchange Rate1.120.65 %Dec 31

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