RJC Mitchell Consultants - Germany Fears Recession

RJC Mitchell Consultants analysts say there is a risk of recession even as the German economy bounced back in the third quarter.

Economists at RJC Mitchell Consultants say there are growing concerns that Germany could be headed for a recession as German Chancellor Angela Merkel plans to extend the partial lockdown the country has been in since the beginning of this month.

Better than expected GDP

The German economy made a better than anticipated recovery in the third quarter when GDP expanded by 8.5% after a 9.8% contraction in the second quarter. However, economists at RJC Mitchell Consultants say the second, more severe wave of coronavirus infections and the subsequent partial lockdown put in place to curb the spread, will likely hamper Europe's largest economy's recovery.

Merkel was expected to announce this week that the "lockdown light" would be extended until the 20th of December. Under the regulations of this lockdown, shops and schools are permitted to remain open but hotels, restaurants and bars have been closed.

As a result, RJC Mitchell Consultants economists say a contraction in Germany's services sector in the final quarter of this year is inevitable. With many of Germany's neighbors also battling a second wave of infections and resorting to a variety of restrictions, RJC Mitchell economists say Germany's exports will likely be affected in the fourth quarter.

The risk of a recession for Germany and its European peers could be increasing even though most countries have chosen to keep their economies at least partially open.

The German government has pledged a further 10 billion euros to assist businesses that have been forced to cease operations during the lockdown but economists at RJC Mitchell Consultants believe additional stimulus may not be sufficient to help the economy avoid a recession.

More debt on the cards, RJC Mitchell Consultants

After years of strict adherence to its no-debt policy, Germany has been forced to borrow large sums to fund its stimulus measures to fight the Covid-19 health crisis and its impact on the economy. Next year the country will take on a further 160 billion euros of debt, a portion of which will be set aside to help businesses in the wake of the pandemic and some will be earmarked for vaccine procurement.

Source: RJC Mitchell Consultants

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