Germany’s powerhouse economy set for worst year since WWII as coronavirus sends exports into ‘freefall’

The manufacturing powerhouse of Europe will contract by 12.2 per cent in April and 6.6 per cent for the year as whole, the latest forecasts show.

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The Covid-19 pandemic has killed more than 6,000 people in Germany but the country has been praised for its comprehensive testing regime which has allowed it to keep its death toll low compared with its neighbours.

The German economic institute Ifo said that national output will not return to pre-pandemic levels until the end of 2021.

Europe's largest economy has already shrunk by 1.9 per cent in the first three months of 2020 and it is expecting a 12.2 per cent contraction in the second quarter.

"We won't be back to the pre-Corona situation until the end of 2021," said Timo Wollmershaeuser, head of economic forecasting at Ifo.

Ifo said last week its survey of German business morale crashed in April in its most dramatic fall on record, hitting the lowest reading since reunification.

But Economy Ministry projections due to be presented next week will show that the low point of the recession is expected this month and will be the worst since 1950,

Around 8,000 workers at Volkswagen's Wolfsburg plant began operating the production line on Monday, with output due to reach 40 per cent of pre-pandemic levels from next week.

Disruption to global trade from the pandemic has clobbered Germany’s traditionally strong manufacturing exports.

And domestic lockdown measures to contain the virus have squashed consumer spending.

German car and truck maker Daimler reported a plunge of nearly 70 per cent in first-quarter operating profit and said the cash flow it uses to pay dividends would fall this year.

The government has responded with measures including a €750 billion (£652 billion) stimulus package,

Retailers with floor space of up to 800 square metres are now allowed to open, along with car and bicycle dealers, and bookstores.

But Germans must practise strict social distancing and hygiene rules.

Anyone caught without a facemask could now face a bank-breaking €10,000 (£8,670) fine under strict new laws to fight coronavirus.

The new Maskenpflicht (mask duty) rule came into force Monday morning, forcing everyone in Germany to wear face masks on public transport, trains and while they shop as the country begins to ease restrictions.