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German Economy Rebounding Faster Than Expected in 2020

September 2, 2020, 07.16 PM

Scholz has already said he will ask parliament to suspend constitutionally enshrined debt limits next year so that the government can plan its 2021 budget with new debt as it sees necessary.

Germany's Bundestag lower house of parliament suspended the debt brake in March and June to allow the government to borrow an additional €217.8 billion this year.

The government has launched an unprecedented array of rescue and stimulus measures since March to shield companies and consumers from the initial impact of the pandemic and help them recover as quickly as possible.

Read also: EU Leaders Seal the Deal on $2.1 Trillion Coronavirus Recovery Fund

The economy contracted by a record 9.7 percent in the second quarter as consumer spending, company investment, and exports all collapsed.

Germany fared better than some other Eurozone economies, however. The French economy contracted by 13.8 percent quarter-on-quarter in the April-June period and Italy's shrank by 12.8 percent.

The German central bank expects household spending to drive a strong recovery in the third quarter, helped by stimulus measures including a temporary cut in value-added tax.

The Ifo economic institute predicts the economy will rebound with a quarterly growth rate of some 7 percent in July-September.

(Writer: Christian Kraemer | Editors: Gareth Jones, Catherine Evans)


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