Deutsche Bank: coronavirus may drag Germany into recession

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
A van of the German Red Cross carrying German citizens repatriated from the Wuhan arrives at the German Red Cross hospital in Berlin Kopenick, on 9 February. (John MacDougall/AFP)

The coronavirus outbreak could cause the German economy to fall into recession this year, according to a study published by Deutsche Bank Research.

“We expect the coronavirus to dampen gross domestic product by 0.2 percentage points in the first quarter, making a technical recession highly possible in the winter half-year," the study says.

The economists said that the coronavirus “poses a risk to the global recovery, as hopes rest on a recovery in the Chinese economy.”

Germany’s export-driven economy is heavily reliant on China, its most important trading partner. Germany’s exporters already felt the effects of the cooling Chinese economy in 2019, and its car manufacturing industry is particularly vulnerable to any weakening demand from the enormous Chinese automotive market.

Read more: European stocks hit new highs as coronavirus fears recede

However, the bank said that “if the spread of the coronavirus soon peaks as expected, demand may simply shift to the later course of 2020."

The number of deaths from the virus, which originated in Wuhan, China, has hit 1,113, according to the Chinese authorities, and the total number of infected has now soared past 44,000.

Deutsche Bank said that its January data had suggested that German economic growth would stablise, but that the data had been collected before the coronavirus outbreak became public knowledge.

S&P Global ratings on Wednesday estimated that the coronavirus outbreak is likely to shave cut 0.1 to 0.2 percentage points off the UK’s economic growth this year.

Germany’s federal statistics office will publish its GDP data for the last quarter of 2019 on Friday.