The German economy continues to contract, losing €15 billion ($16.6 billion) a week due to the recession caused by Covid-19, a new report has said. It warned that it will take at least eight years for the country to recover.
Germany is expected to lose between five and 10 percent of its GDP by the end of 2020, the German branch of the US-based consulting firm McKinsey & Company wrote in its recent report.
The economy contracted by 25 percent in April compared to the previous year, which amounts to losing roughly €15 billion ($16.6 billion) per week.
The analysts at McKinsey warned that the German economy will return to its pre-pandemic growth level in 2028, if the country enacts structural reforms towards more automation and AI-based industries. “Otherwise, the return to the original growth model will no longer be feasible in this decade,” the report said.
Even if the nationwide stoppage of production like in Italy or Spain can be avoided, it is already becoming apparent that the consequences of the pandemic will exceed those of the 2008/2009 financial crisis in certain dimensions.
By McKinsey’s estimates, the pandemic-induced crisis has affected up to nine million workers, which is “seven times more that during the peak of the [2008-2009] financial crisis.”
The firm’s grim forecasts correspond with the sober tone of the German government. Earlier this week, Economy Minister Peter Altmaier warned that the country “will experience the worst recession in the history of the federal republic” founded shortly after WWII.
“The effects of the coronavirus pandemic will push our economy into a recession after 10 years of growth,” Altmaier said.
The crisis has badly hit neighboring France as well, where Prime Minister Edouard Philippe predicted last month that the country will suffer from its worst recession since 1945.