Watze has hinted that the Bundesliga giants could have sold the England international to Ole Gunnar Solskjaer's side but are "glad" that they managed to keep hold of him.
"We could have made a big, valuable transfer in the summer, that's well known," Watzke told Bild. "But we're glad it didn't come to this.
"Of course, we will also implement transfers again in the future, because corona is clearly throwing us back. Even the biggest clubs are feeling the effects of the pandemic, be it Bayern, Barcelona or Real Madrid.
"At some point you come to the limit of what you can answer for. You can even see that in Munich right now with David Alaba as an example."
Sancho, who is still believed to be a target for United, has scored twice and registered four assists in eight appearances at club level during the 2020-21 campaign.
The 20-year-old's existing deal at Signal Iduna Park is due to run until June 2023.