German economic output collapsed by 16% during the shutdown of production due to the coronavirus pandemic. This was made clear by an April survey of 8800 companies by the Munich-based Ifo industries.

The country’s economy is likely to shrink by 6.6% in 2020 due to the damage caused by the COVID-19 pandemic, according to the German Institute of Economics. According to economic experts, gross domestic product growth of Europe’s strongest economy will not return to its usual pace of growth before the end of 2021.

The German economy reported a 1.9% decline in the first quarter of the year, according to Ifo. The forecast for the second quarter is a 12.2% decrease, based on expectations based on companies’ working capacity.

“We will not return to pre-coronavirus levels until the end of 2021”, said Timo Wollmershäuser, economic forecasting director at Ifo. That would mean an economic expansion of 8.5% in 2021, he added.

Last week, Ifo warned that sentiment among managers in Germany had reached catastrophically low levels. The most important leading indicator – the business climate index, calculated by Ifo, fell to 74.3 points in April from 85.9 points in March.

As the German economy is heavily dependent on exports, the global trade disruption caused by the pandemic is limiting the activities of German factories, while at the same time national coronavirus prevention measures are reducing consumer spending.

Highlighting the negative impact of COVID-19 on the business, German carmaker Daimler reported a nearly 70% drop in operating profit for the first quarter, saying that cash flow used to pay dividends would shrink significantly this year.

The government has responded to the spread of the coronavirus with measures including a stimulus package of 750 billion USD. How the economy will recover, however, will depend on how quickly Germany eases measures that block the economy.

At the same time, German Chancellor Angela Merkel worries that the citizens of the country no longer make as much effort for social distance. It opposes pressure from some local authorities to further ease restrictions.