The German federal government expects the country’s economy to decline even more sharply this year than it has before. Because of the coronavirus, the Ministry of Economy now expects the gross domestic product to drop by 6.3% in its spring forecast. The forecast so far has been minus 6%.

“The decline will be stronger than in the financial crisis. The lowest recession point is likely to be reached in April”, says the draft spring forecast of the ministry. The federal government is still expecting the economy to develop by the so-called “V” method since the crisis.

Next year, growth should again be just over 5%. Stabilization may begin in May at low speeds, and economic recovery may occur in the second half of the year and next year, the project says. However, the economic result from the end of 2019 will not be reached again until the beginning of 2022.

The federal government will present its spring forecast on April 29. The final growth figures will be determined next week, so there may still be some slight changes.

The spring forecast is the basis for the tax assessment in early May. So far, the federal government is expecting a tax revenue of about 82 billion EUR this year. According to a new growth forecast, the tax cut may also be slightly higher, according to government circles.

Earlier today, the most important leading indicator of sentiment in the German economy, the Ifo business climate index, fell to 74.3 points in April, after 85.9 points in March. This is the lowest measured value in history – there has never been a greater decline.

The IHS Markit’s Purchasing Managers’ Index also fell to a record low on Thursday. In this survey, among managers, 75% of responders and almost as many managers from industrial companies claim that their sales have shrunk significantly. Sales of service providers have fallen more than ever in the 20-year history of this survey.

“Both internal and external demand have collapsed”, wrote IHS Markit economist Phil Smith. More jobs were cut in the services sector than in the midst of the recession in the April 2009 financial crisis, and in the industry, staff contraction accelerated – despite part-time work.

In any case, leading economists are beginning to further reduce their projections of the German economy for 2020. The head of the government’s economic advisers, Lars Feld, now expects gross domestic product (GDP) to shrink by at least five and a half percentage points in 2020. The economy may shrink more than the recession in the financial crisis of 2009.

Three and a half weeks ago, when the Council of Economic Experts presented a special report on the pandemic to the Minister of the Economy, Peter Altmaier, the worst-case scenario was -5.5%. However, the IMF expects German GDP to collapse by 7% in 2020. Even among major economic research institutes, which predicted -4.2% in 2020 in their joint diagnosis two weeks ago, many now expect the decline to be at least -5%. Therefore, markets are eagerly awaiting which recession forecast the government will commit to next week.