Germany's export-reliant industrial sector is already in the midst of a recession, with car manufacturers especially feeling the pain from months of China-US trade tensions and Brexit uncertainty.
As the deadly coronavirus wreaks havoc on international supply chains and saps consumer demand, Germany's BDI industry federation said worse was to come.
“German industry is facing the longest recession since reunification” of the country in 1990, BDI said in a quarterly report.
The sector, a key growth driver in Europe's top economy, has already seen six consecutive quarters of shrinkage.
In the final quarter of 2019, German industrial production fell by 5.7 percent year-on-year.
The BDI said the combined effects of weak global growth, increased uncertainty and factory disruptions were having “a negative effect” on companies' willingness to spend money and invest.
The entrance to the Hannover Messe, a world famous tech fair which was cancelled on Wednesday over coronavirus fears. Photo: DPA
The industry body now expects the German economy as a whole to grow by just 0.5 percent in 2020, compared to 1.1 percent growth forecast by the government in January before the virus spread across the world.
The BDI urged the German government to use its fat budget surpluses to support affected industries and encourage investment.
Berlin must “swiftly” take action “to adequately respond to the crisis”, it said.
It added that it welcomed recent indications from Berlin suggesting that Chancellor Angela Merkel's government stood ready to support the German economy.
Finance Minister Olaf Scholz last week said the government had the means to “launch a fiscal stimulus package” if the situation worsened.
Highlighting the bleak outlook, German car parts maker Continental on Thursday said it expected car production worldwide to fall by two to five percent in 2020, partly because of the huge impact of the coronavirus on China.