According to the latest readings published by Germany’s IFO index, the businesses across the region are displaying a pessimistic sentiment and painting a gloomy picture for the German economy as the coronavirus pandemic leaves a long-lasting impact.
Europe is going to extreme lengths to safeguard its population from the near-fatal virus. However, while doing so, it is battling another challenge – the economic slowdown. The COVID-19 outbreak is not only taking a toll on the global healthcare system but also impairing the economies.
As the European Central Bank forecasted earlier this month, Europe is likely to be the worst-hit region from the pandemic as businesses struggle to cope up with the declining sales, and the area continues to report increasing unemployment rate each day.
German IFO index records all-time lows
On 24th April, the German IFO index recorded a business sentiment that was only prevalent during the 2008 financial crisis and the recession that hit the global economy subsequently. According to the IFO institute, the coronavirus has resulted in the region witnessing the worst-ever decline in decades.
The reading takes into account the business sentiments of around 9000 German companies. It is often used as an indicator of the overall business environment and how German businesses are competing with the rest of the world.
In its April report, the overall enthusiasm among the German businesses was quite gloom-ridden and reported 74.3 points, as opposed to 85.9 reading from the previous month. Although it is yet to sink to its lowest-ever figure, experts claim that as the lockdown measures intensify, affecting the purchasing power of the consumers, the German economic prospects will continue to be downbeat.
The report also states that the last time the IFO index expressed a gloomy forecast was when the global recession hit the German economy with full fury, back in 2009. It was when the country reported negative economic growth with the highest ever unemployment rate.
All hopes rest on May
Although it cannot be said for sure how things would play out this time, given the fact the government relaxing the lockdown measures gradually and commencing businesses under strict guidelines, it is clear that the country has an uphill battle ahead.
Focussing on the positive side, the German government is doing all it can to rescue its flailing economy. From approving a EUR 10 billion stimulus payout, offering financial aid to the jobless to reducing the VAT for struggling businesses, it is pulling out all stops to mitigate the repercussions, thus implying that the May IFO index figures could be slightly positive.
Moreover, the IFO President, Clemens Fuest, has mentioned that although citizens must not expect a full recovery within this year, it is hopeful that it will at least be on a much-awaited path to recovery by the second half of this year, possibly suggesting that there might very well be a light at the end of the very long dark tunnel.