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Business sentiment in Germany has plummeted, companies are going through difficult times

Companies in Germany are going through difficult times

Business sentiment in Germany has fallen sharply this month after the previous increase, with the Ifo Institute index falling from 98.9 to 90.8 points. While since January, entrepreneurs and companies have been looking at the coming months with growing optimism and expectation of the end of the coronavirus crisis, Russia's invasion of Ukraine at the end of February destroyed all their hopes.

"Companies assess their current situation worse. Entrepreneurs are counting on bad times," the institute said. Thus, the Ifo business sentiment index is experiencing a drop similar to the beginning of 2020, when the COVID-19 pandemic hit Germany with forced lockdowns.

Ifo indicates that business expectations have now fallen by 13.3 points, which is more significant than due to the pandemic in March 2020, when the drop was 11.8 points. The expectations index, which is one of the determinants of the business sentiment index, fell from 98.4 to 85.1 points.

"In the manufacturing industry, the index has fallen like never before," Ifo said, adding that pessimism has overtaken entrepreneurs. "Now they assess their business prospects as extremely uncertain," the institute added.

There was also a significant drop in sentiment in the services sector. According to Ifo, the logistics sector is particularly anxious about the coming months.

Russia's invasion of Ukraine and the unstable international situation will be a significant drag on economic recovery after the pandemic. According to Ifo calculations, the coronavirus crisis has cost the German economy 330 billion euros (eight trillion crowns) in economic losses, while the energy crisis and the consequences of the war will require tens of billions more. The Ifo announced on Wednesday that it had lowered its forecast for German gross domestic product (GDP) growth to 2.2-3.1 percent. Back in December, he predicted growth of 3.7 percent.

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