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German government raises 2020 GDP forecast to -5.5%, source says

FILE PHOTO: Containers are seen at a terminal in the port of Hamburg, Germany November 14, 2019. REUTERS/Fabian Bimmer

BERLIN (Reuters) - The German government will revise upwards its forecast for growth domestic product (GDP) for 2020 when it presents an update to its estimates this week, a source familiar with the government’s forecast told Reuters on Monday.

The government now expects GDP to shrink 5.5% in 2020 compared to a previous estimate for a 5.8% decline, the source said.

This means the recession triggered by the coronavirus pandemic will be slightly milder than the loss of output caused by the global financial crisis in 2009 when GDP fell by a record 5.7%.

The economy ministry declined to comment and said Economy Minister Peter Altmaier would present the updated forecast on Wednesday.

The German economy contracted by 9.7% in the second quarter as household spending, company investments and trade collapsed at the height of the pandemic.

An easing of lockdown measures, coupled with an unprecedented array of rescue and stimulus packages, led to a robust recovery in the third quarter.

But a spike in new coronavirus cases has caused concern activity could slow again, and German business morale fell for the first time in six months in October. [L8N2HH24A]

For 2021, the government is still sticking by its previous forecast for GDP growth of 4.4%, the source said.

Additional reporting by Christian Kramerer; Writing by Caroline Copley; Editing by Maria Sheahan, Thomas Seythal, Toby Chopra and Peter Graff

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