Monday 15 June 2020 12:05 pm

German economy to contract more sharply in second quarter than first, warns ministry

The German economy will contract more in the second quarter than in the first, the country’s economic ministry said, warning that the recovery in the second half of 2020 would be sluggish.

Europe’s largest economy went into lockdown in March, with many shops closing and factories halting production in a bid to limit the spread of coronavirus in the country.

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“The economic recovery phase will take time because the epidemiological risks persist and citizens and companies react to them,” the ministry said in its monthly report on the German economy.

The ministry added that it looked like the trough of the economic downturn had passed and that the gradual easing of lockdown measures mean that the country’s economic revival is likely to have started in May.

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The ministry said German foreign trade was likely to revive from May after exports and imports in April posted their biggest declines since records began in 1990, but it predicted a significant decline in exports and imports for 2020 as a whole.

The ministry’s report comes as Angela Merkel’s budget chief said that Germany’s new borrowing will rise to €218bn this year as the country fights the economic slump caused by coronavirus.

Eckhardt Rehberg’s comments to Bild newspaper follows a Reuters report last week that the country’s overall new borrowing would probably balloon beyond €200bn this year.

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The German government has stuck to a growth forecast given in April for a 6.3 per cent contraction this year, but many economists have made more pessimistic predictions about the impact of coronavirus on the economy.

Germany’s benchmark Dax index was trading 0.86 per cent down by 11.30am UK time.