COVID-19 effect: Germany to lower its 2021 economic growth forecast

The German government expects the economic devastation caused by the coronavirus pandemic this year to be slightly less severe than originally feared, but it will revise downward its growth forecast for next year, two sources told Reuters on Monday. Economy Minister Peter Altmaier will present the updated outlook for Europe's largest economy on Tuesday after it suffered its worst recession in peacetime in the first half of the year.

The government said in April at the height of the pandemic that it expected the economy to rebound with an expansion rate of +5.2% in 2021 following a record plunge of -6.3% this year. "The recovery next year will be somewhat less strong than initially expected," a person familiar with the government's updated forecast said on condition of anonymity.

This means that the German economy will probably not reach its pre-crisis level before 2022, a second source said. An economy ministry spokesman declined to comment. A coalition source had told Reuters on Friday that the government is likely to revise upward its 2020 economic growth forecast to a decline of less than 6%. Still, this would be the biggest plunge since the end of World War Two.

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