DIW says German GDP may drop by over 9% in 2020

The euro area's largest economy may be set for an even sharper contraction than was already feared if the latest forecasts from research institute DIW are anything to go by.

DIW projected that Germany's gross domestic product could sink by 9.4% in 2020, which would mark the most severe contraction since World War II.

That compares to forecasts from other forecasters, including the Bundesbank and the Organisation for Economic Cooperation and Development of 7.1% and 6.6%, respectively.

"The slump in the German economy this year will be significantly worse than during the financial crisis some 10 years ago," DIW President, Marcel Fratzscher said.

"The fact that many companies are dependent on exports makes the German economy very vulnerable in times of crisis."

Not much better was anticipated for 2021, with DIW, one of Germany's six leading economic institutes, anticipating a rebound of only 3%.

Nonetheless, if completely implemented, the government's recently announced stimulus package might limit the drop in GDP estimated for 2020 to 8.1%, followed by GDP growth of 4.3% in the following year.