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German economic advisers see smaller GDP drop in 2020, weaker recovery in 2021

BERLIN, Nov 11 (Reuters) - The German economy will shrink less than initially feared this year thanks to a surprisingly strong rebound over the summer, but a second wave of the COVID-19 pandemic is clouding the growth outlook for next year, the government’s council of economic advisers said on Wednesday.

“We’ve not yet overcome the coronavirus crisis,” council head Lars Feld said, adding that the economic recovery remained fragile due to the rapid rise in new coronavirus infections.

“Further developments depend on how the pandemic can be contained and how other economies abroad fare,” Feld said in reference to Germany’s relatively large reliance on exports.

The council now sees the economy shrinking by 5.1% this year which translates into a calendar-adjusted decline of 5.5%. In June, it had forecast a decline of 6.5% (or -6.9% in calendar-adjusted terms).

This means that the economic devastation caused by the pandemic could be smaller than the shock suffered during the world financial crisis in 2009, when the economy shrank by 5.6%.

For 2021, the council lowered its GDP growth forecast to 3.7% from its previous estimate of 4.9%. The advisers expect economic output to broadly stagnate over the winter months due to a second wave of infections and renewed lockdown measures. (Reporting by Michael Nienaber, editing by Thomas Escritt)