Germany’s Economy Currently on “Red Alert”

As the deadly coronavirus continues to spread around the world, the German economy has recently taken a hit. In fact, the country’s financial situation is expected to grow dire in the coming months as a result of the rapidly spreading virus.

“The mood among German investors slumped in March to levels last seen at the beginning of the world financial crisis in autumn 2008 due to alarm at the impact of the coronavirus outbreak on Europe’s largest economy, a survey showed on Tuesday,” according to Reuters.

More specifically, it appears that economic sentiment in the country is rapidly declining. “The ZEW research institute’s monthly survey showed economic sentiment among investors collapsed to -49.5 from 8.7 in February. This was the biggest drop since the survey began in 1991. Economists had expected a drop to -26.4,” as noted by the news service.

“The economy is on red alert,” said ZEW President Achim Wambach in a statement to Reuters. He continued that “financial experts expect the economy to shrink in the first quarter and think a contraction is also very likely in the second quarter.”

Additionally, the country’s GDP is expected to decline in the coming months to the tune of about 1% because of the pandemic, according to Reuters. “The spread of the coronavirus has ended hopes of a first-quarter upswing on the back of a solid increase in retail sales and a jump in industrial production in January,” according to the news service.

“Things are likely to get much worse in Q2, when we expect much bigger quarterly falls in GDP than during the depths of the global financial crisis,” said Jack Allen-Reynolds from Capital Economics in an interview with Reuters.

Meanwhile, the German economy could suffer for most of the year. “The German economy ministry said it no longer expected an economic upswing in the first quarter because of the impact of the coronavirus on growth, with the economy unlikely to stabilize before the third quarter at the earliest,” according to Reuters.

“The strength and duration of the impact cannot yet reliably be forecast,” the ministry said.