Germany Fears Longest Recession Since Reunification

BERLIN (AFP) — Economic upheaval caused by the fast-spreading coronavirus threatens to plunge Germany’s crucial industrial sector into “the longest recession since reunification,” a powerful industry body said Thursday.

Germany’s export-reliant industrial sector is already in the midst of a recession, with car manufacturers especially feeling the pain from months of the China-U.S. trade war and Brexit uncertainty.

A Uniper coal-fired power plant and a BP oil refinery and chemical plant in Gelsenkirchen, Germany. (AP photo/Martin Meissner)

As the deadly coronavirus wreaks havoc on international supply chains and saps consumer demand, Germany’s BDI industry federation (Bundesverband der Deutschen Industrie, or the Federation of German Industries) said worse was to come.

“German industry is facing the longest recession since reunification” of the country in 1990, BDI said in a quarterly report.

The sector, a key growth driver in Europe’s leading economy, has already seen six consecutive quarters of shrinkage.

In the final quarter of 2019, German industrial production fell by 5.7% year-on-year.

The BDI said the combined effects of weak global growth, increased uncertainty and factory disruptions were having “a negative effect” on companies’ willingness to spend money and invest.

The industry body expects the German economy as a whole to grow by just 0.5% in 2020, compared to 1.1% growth forecast by the government in January before the virus spread across the world.

The BDI urged the German government to use its fat budget surpluses to support affected industries and encourage investment.

Berlin must “swiftly” take action “to adequately respond to the crisis,” it said.

It said it welcomed recent indications from Berlin suggesting that Chancellor Angela Merkel’s government stood ready to support the German economy.

Finance Minister Olaf Scholz said last week that the government had the means to “launch a fiscal stimulus package” if the situation deteriorated.

Highlighting the bleak outlook, German car parts maker Continental on Thursday said it expected car production worldwide to fall by 2% to 5% this year, partly because of the huge impact of the coronavirus on China.

© Agence France-Presse

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