March 19, 2020 / 10:00 AM / 4 months ago

Deutsche Bank expects German economy to contract 4%-5% in 2020

FILE PHOTO: The logo of Deutsche bank is seen in Hong Kong, China July 8, 2019. REUTERS/Tyrone Siu

LONDON (Reuters) - Deutsche Bank slashed its forecast for Germany’s economy on the coronavirus fallout, saying it now expected the euro zone’s largest economy to contract between 4-5% in 2020 while industrial production could shrink by 10%.

“Within days lockdown measures and (temporary) factory closures have reached a level that suggests a far bigger H1 contraction than previously thought,” Deutsche’s chief economist Stefan Schneider said, adding he had previously expected German economic growth to decline between 1-2% this year.

This new estimate was “notwithstanding a recovery in H2, as – in contrast to 2009 – the service sector will be hard hit, too,” he added in a note sent out on Thursday.

Deutsche Bank also updated its forecasts for other major economies. It predicts the United States economy will contract by 0.8% this year while Japan will suffer a 1.7% decline. Deutsche’s forecast for world economic growth was now at 2.0%.

Reporting by Karin Strohecker; Editing by Dhara Ranasinghe

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