Germany’s Economy Minister Peter Altmaier said that the German government’s strong response helped fuel a quicker than expected recovery from the Covid-19 shock.
He also presented the government’s updated forecasts on Tuesday. Despite the upbeat news, sluggish foreign demand is likely to weaken the rebound in Europe’s largest economy in 2021.
"The recession in the first half of the year turned out to be less severe than we had feared," Altmaier told reporters, adding that the worst was over for the economy.
"Overall, we can say that at least for now, we are dealing with a V-shaped development," Altmaier said. He added that he did not expect authorities to impose another round of lockdown measures as in March and April.
Confirming an earlier Reuters report, Altmaier said Berlin had revised upwards its 2020 forecast to a decline of 5.8 percent from a previous estimate of -6.3 percent.
That would still represent the biggest economic slump since World War Two. The German economy contracted by 5.7 percent in 2009 as the global financial crisis unfolded.
For 2021, the government revised downward its growth forecast to an expansion of 4.4 percent from its previous estimate of 5.2 percent.
This means the economy will not reach its pre-pandemic size before early 2022, Altmaier said.
The government expects exports to tumble by 12.1 percent this year before jumping by 8.8 percent in 2021. Private consumption is seen falling by 6.9 percent this year and then rising by 4.7 percent in 2021.
Suspending debt limits
The revised forecasts will form the basis of tax revenue estimates, which the finance ministry is expected to update next week.
This will be followed by Finance Minister Olaf Scholz's proposal for the federal government's budget in 2021.