Germany's extended lockdown to delay recovery till early summer

BERLIN: A looming extension of COVID-19 lockdown measures in Germany will delay a much hoped-for recovery in Europe's largest economy from spring until early summer, economists said on Monday.

Chancellor Angela Merkel and state premiers are expected on Monday to extend restrictions on shopping and travelling until April 18 in a bid to contain a third wave of COVID-19 cases, according to a draft proposal seen by Reuters at the weekend.

"The upswing that was actually expected for spring is now more likely to set in from early summer," Deutsche Bank chief economist Stefan Schneider said.

"The prerequisite for this is that the infection rate declines as the weather warms up, and that there will be progress in vaccinations," Schneider added.

Deutsche Bank has therefore cut its growth forecast for Germany's gross domestic product (GDP) in the second quarter to 2% from a previous estimate of 4%, Schneider said.

For 2021 as a whole, Deutsche Bank reduced its GDP forecast to 3.7% from 4.0%.

The government has already cut its 2021 full-year growth forecast to 3%.

Claus Michelsen, chief economist from the Berlin-based DIW economic institute, said he expected the economy to shrink by 1.5% quarter-on-quarter in the first three months of the year and to grow by 2.0% in the second quarter.

This means that the recovery will be significantly weaker than the one in the previous summer following the first COVID-19 lockdown when the economy rebounded by 8.5%, Michelsen said.

"We expect to see the peak of the third wave of infections after the Easter holidays in mid-April. After that, things should gradually get better," Michelsen said.

"From August onwards, the chances are good for a more sustainable recovery."