Category Archives: Ifo

9/4/20: Ifo Eurozone Forecast Q1-Q3 2020: Covid19 Impacts


Germany's ifo Institute joint forecasts for Eurozone growth are out today. Bleak reading. The forecasts below assume that Covid-19 restrictions will be gradually lifted over the summer 2020.

Seasonally and working-day adjusted GDP growth:


From ifo forecast: "The economy in the euro area is expected to slide into a deep recession in the first half of 2020:

  • GDP growth is forecast to be -2% in Q1 and -10% in Q2, followed by a recovery in Q3 with +8%. 
  • Due to the lack of comparable events in the last decades and the unpredictable course of the pandemic, these estimates are subject to substantial uncertainty."
  • "Gross fixed capital formation is also certain to decline, with -2% in Q1 and -10% in Q2, due to supply disruptions, planning uncertainty and a preference for liquidity."
  • "Foreign demand is likely to contribute negatively to growth, as a result of the euro area’s exposure to recessive international trade and a struggling global economy."


Inflation environment:

Headwinds and risks: 

  • "A more unfavorable course of the pandemic would require longer and possibly stricter containment measures...
  • "Despite massive liquidity provision by governments and central banks, a prolonged downturn would then lead to liquidity strains in the economy. 
  • Increased debt levels associated with low income flows and asset devaluations are likely to lead to solvency issues for thinly capitalized corporations and private households.
  • An ensuing rise in loan defaults could in turn lead to problems in the banking sector." 
  • "A resurgence of the European debt crisis on a large scale thus constitutes a non-negligible risk to the forecast."

9/4/20: Ifo Eurozone Forecast Q1-Q3 2020: Covid19 Impacts


Germany's ifo Institute joint forecasts for Eurozone growth are out today. Bleak reading. The forecasts below assume that Covid-19 restrictions will be gradually lifted over the summer 2020.

Seasonally and working-day adjusted GDP growth:


From ifo forecast: "The economy in the euro area is expected to slide into a deep recession in the first half of 2020:

  • GDP growth is forecast to be -2% in Q1 and -10% in Q2, followed by a recovery in Q3 with +8%. 
  • Due to the lack of comparable events in the last decades and the unpredictable course of the pandemic, these estimates are subject to substantial uncertainty."
  • "Gross fixed capital formation is also certain to decline, with -2% in Q1 and -10% in Q2, due to supply disruptions, planning uncertainty and a preference for liquidity."
  • "Foreign demand is likely to contribute negatively to growth, as a result of the euro area’s exposure to recessive international trade and a struggling global economy."


Inflation environment:

Headwinds and risks: 

  • "A more unfavorable course of the pandemic would require longer and possibly stricter containment measures...
  • "Despite massive liquidity provision by governments and central banks, a prolonged downturn would then lead to liquidity strains in the economy. 
  • Increased debt levels associated with low income flows and asset devaluations are likely to lead to solvency issues for thinly capitalized corporations and private households.
  • An ensuing rise in loan defaults could in turn lead to problems in the banking sector." 
  • "A resurgence of the European debt crisis on a large scale thus constitutes a non-negligible risk to the forecast."

8/4/20: Ifo Institute Germany Forecast for 2020


A surprisingly 'positive' forecast for Germany from ifo Institute this morning:



While GDP contraction for 2020 looks sharp at -4.2 percent y/y, unemployment figures appear rather robust and employment levels seem to be only weakly impacted. Forecast for current account implies subdued global demand shocks. The swing in the fiscal position is roughly 6.5 percent of GDP, reflecting emergency supports measures. This is significant, and underpins shallower expected effects on employment and unemployment, as well as no deflationary dynamics in labour costs.

My view: Germany entered the pandemic crisis with already weak economy. 2019 growth at 0.6 percent was shockingly weak, with the economy skirting recession. Massive strength in the current account was reflective of weak domestic demand and the economy dependent on growth momentum globally. This momentum is now severely disrupted, and I do not expect robust global recovery outside domestic demand. In other words, my view is that worldwide exports are unlikely to rebound robustly in H2 2020, putting severe pressure on net exporting economies, like Germany and Italy.

So, whilst 4+ percent drop in full year GDP might be fine, I would expect closer to 5-5.5 percent decline (reflective of weaker prices), and much more pronounced impact on unemployment and employment levels.

18/2/16: Europe’s Problem is Not Germany…


CES-Ifo just released their survey results for the regular poll of some 220 German economists. And if you think that professionals are at any odds with Schäuble on monetary policy of the ECB, think again.

Which, of course, is absolutely correct. For German economy, ECB's policy is too loose. For French economy, about right. For Italy and Spain - probably somewhat too restrictive, although who on Earth can tell with any degree of confidence what 'about right' policy for these two can even look like...

Still, the key point remains: Euro is still a malfunctioning currency that cannot reconcile differences between various economies. In other words, Europe's problem is not Germany. It is not France, nor Spain, nor Italy. Europe's problem is not even Euro. Instead, Europe's problem is Europe.

14/2/16: Ifo WorldEconomic Climate Index: 1Q 2016


Global growth leading indicators are screaming it, Baltic Dry Index is screaming it, PMIs are screaming it, BRICS are living it, and now Ifo surveys are showing it: global economy is heading into a storm.

The latest warning is from the Ifo World Economic Climate Index.

Per Ifo release: “The Ifo Index for the world economy dropped from 89.6 points to 87.8 points this quarter, drifting further from its long-term average (96.1 points). While assessments of the current economic situation brightened marginally, expectations were less positive than last quarter. The sharp decline in oil prices seems to be having no overall positive economic impact. Growth in the world economy continues to lack impetus.”

In numbers, thus:

  • Headline World Economic Climate Index is now averaging 88.7 over the two quarters through 1Q 2016, which is statistically below 97.7 average for the 2 quarters through 3Q 2015 and 93.2 average for 4 quarters through 1Q 2016. Current 2 quarters average is way lower than 8 quarters average of 98.4. Historical average is 94.9, but when one considers only periods of robust economic growth, the index average is 98.9. Again, current 2 quarters average is significantly below that.
  • Present Situation sub-index 2 quarters average is at 87.0, which is woefully lower than 2 quarters average through 3Q 2015 at 91.6 and is well below 96.0 average for the historical series covering periods of robust economic expansions.
  • Expectations for the next 6 months sub-index is at 90.4 on the 2 quarters average basis, down from 103.5 2 quarters average through 3Q 2015 and below historical (expansion periods only) average of 101.5.


Geographically, per Ifo release: “The economic climate deteriorated in all regions, except in Oceania, Asia and Latin America. In Oceania the climate index stabilised at a low level, and in Asia and Latin America it edged upwards. The indicator is now below its long-term average in all regions, with the exception of Europe. The climate in the CIS states and the Middle East clouded over, especially due to poorer economic expectations. In Europe WES experts are slightly less positive about future economic developments than in October 2015. In North America and Africa, by contrast, the slightly less favourable economic situation led to a deterioration in the economic climate.”

You can see my analysis of the European index data here: http://trueeconomics.blogspot.com/2016/02/5216-ifo-economic-climate-index-for.html.