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Bundesbank with a very bleak forecast for the German economy

Germany's economy is in a severe recession and is unlikely to mark a rapid recovery because many restrictions in place related to the spread of coronavirus could remain in place for an extended period, the Bundesbank predicted in its regular monthly economic report, published on Monday, reports “Trud”.
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As the country is virtually closed by mid-March due to the coronavirus pandemic, the largest European economy had to stop, although discussions are now taking place to ease some of the restrictions in the coming weeks.

“The substantial restrictions are likely to remain in place until a medical solution such as a vaccine for Covi-19 is available,” the German central bank said, adding: “For this reason, a rapid and strong economic recovery seems unlikely.”

Earlier this month, the International Monetary Fund presented its latest global macroeconomic projections, according to which the German economy will shrink by 7.0% this year. At the same time, forecasts of a number of German private economic institutions are in a fairly large range, but almost all of them expect a deeper recession compared to 2009, when Germany's economy shrank by more than 5 percent.

Economic indicators for the first quarter were already hit hard by the viral pandemic, but the second quarter will be even worse, the Bundesbank warned, pointing to the serious decline in car production and household consumption.

“However, there are no fears that the German economy could fall into the self-generating downward spiral,” the central bank added, arguing that stimulating fiscal and monetary policies would support recovery.

It also said that inflation, which is generally a major target of ECB policy, is likely to fall sharply in the coming months as very low oil prices will quickly affect consumer prices as well.

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