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DPA
Berlin
The German economy contracted sharply last year in the wake of the coronavirus crisis, setting the stage for a faltering start to the economic year.
Europe’s biggest economy shrank by a sharp 5 per cent last year, the Federal Statistical Office (Destatis) said on Thursday, after growing by 0.6 per cent in 2019, with vast tracts of economic and public life in the nation shuttered for extended periods in 2020.
The global pandemic resulted in the nation’s economy tumbling into “a deep recession, ending 10 years of growth,” Destatis President Georg Thiel said unveiling the gross domestic product (GDP) data.
Analysts had expected Destatis would say German GDP had shrunk by 5.1 per cent last year after revising up their forecasts from earlier last year when the nation’s economy was engulfed by the first wave of the often deadly virus.
However, they have also warned of tough months ahead for the economy.
“The economic roller-coaster ride looks set to continue,” said Katharina Utermoehl, Allianz economist. “The German economy is in for a sharp growth setback in early 2021,” she said.
Allianz expects GDP growth this year of 3.5 per cent, which is roughly in line with other forecasts.
Exports plunged last year by about 10 per cent, imports fell 8.6 per cent and private consumption posted a record 6-per-cent drop, Destatis said.
Corporate investment also slumped, with the building sector and government spending emerging as the only bright spots in the Destatis report.
Still, Albert Braakmann, who heads Destatis’ National Accounts section, said the German economy “has come relatively well through the crisis” compared with many other nations.
Indeed, despite the imposition of harsh lockdown measures, the contraction in 2020 was less dramatic than the 5.7-per-cent slump posted in 2009 at the height of the global financial crisis.
In particular, the nation’s key manufacturing sector has helped to offset a slump in the service sector, with industrial companies having rebounded strongly from the lockdown imposed in March and April when extensive parts of the economy were in a standstill.
Manufacturing has also been largely excluded from the latest measures introduced in November and extended last week to the end of January, with the anti-virus steps principally aimed at the service sector and households.
Thursday’s data also served to raise hopes that Germany might escape a fourth-quarter contraction with Destatis saying it expects the economy to have stagnated in the final three months of 2020.
German Economics Minister Peter Altmaier is confident that the economy will return to growth in 2021 despite the pandemic.
“The economy will recover this year, there will be an upswing year,” Altmaier told a conference organized the German business daily Handelsblatt.
But government leaders have already been warning that the current lockdown might need to be extended beyond January, which is likely to further hit the nation’s first-quarter economic performance.
The scale of the recovery is also likely to depend on the success and speed of the Covid-19 immunization programme, which has been criticized for its uncertain start.
This adds to the political risk is that the economic fallout from the pandemic could drag into the year and overshadow the build-up to the national election set down for September, with voters in six states also going to the polls in the coming months.
In addition, Thursday’s data highlighted the fact that a major task for governments in the coming 12 months is to try to rein in the budget deficit.
Germany posted its first budget deficit since 2011 in 2020 as a result of the economic crisis unleashed by the spread of the coronavirus.
The nation recorded a deficit last year of 4.8 per cent of GDP, its second highest since German unification in 1990.
Berlin
The German economy contracted sharply last year in the wake of the coronavirus crisis, setting the stage for a faltering start to the economic year.
Europe’s biggest economy shrank by a sharp 5 per cent last year, the Federal Statistical Office (Destatis) said on Thursday, after growing by 0.6 per cent in 2019, with vast tracts of economic and public life in the nation shuttered for extended periods in 2020.
The global pandemic resulted in the nation’s economy tumbling into “a deep recession, ending 10 years of growth,” Destatis President Georg Thiel said unveiling the gross domestic product (GDP) data.
Analysts had expected Destatis would say German GDP had shrunk by 5.1 per cent last year after revising up their forecasts from earlier last year when the nation’s economy was engulfed by the first wave of the often deadly virus.
However, they have also warned of tough months ahead for the economy.
“The economic roller-coaster ride looks set to continue,” said Katharina Utermoehl, Allianz economist. “The German economy is in for a sharp growth setback in early 2021,” she said.
Allianz expects GDP growth this year of 3.5 per cent, which is roughly in line with other forecasts.
Exports plunged last year by about 10 per cent, imports fell 8.6 per cent and private consumption posted a record 6-per-cent drop, Destatis said.
Corporate investment also slumped, with the building sector and government spending emerging as the only bright spots in the Destatis report.
Still, Albert Braakmann, who heads Destatis’ National Accounts section, said the German economy “has come relatively well through the crisis” compared with many other nations.
Indeed, despite the imposition of harsh lockdown measures, the contraction in 2020 was less dramatic than the 5.7-per-cent slump posted in 2009 at the height of the global financial crisis.
In particular, the nation’s key manufacturing sector has helped to offset a slump in the service sector, with industrial companies having rebounded strongly from the lockdown imposed in March and April when extensive parts of the economy were in a standstill.
Manufacturing has also been largely excluded from the latest measures introduced in November and extended last week to the end of January, with the anti-virus steps principally aimed at the service sector and households.
Thursday’s data also served to raise hopes that Germany might escape a fourth-quarter contraction with Destatis saying it expects the economy to have stagnated in the final three months of 2020.
German Economics Minister Peter Altmaier is confident that the economy will return to growth in 2021 despite the pandemic.
“The economy will recover this year, there will be an upswing year,” Altmaier told a conference organized the German business daily Handelsblatt.
But government leaders have already been warning that the current lockdown might need to be extended beyond January, which is likely to further hit the nation’s first-quarter economic performance.
The scale of the recovery is also likely to depend on the success and speed of the Covid-19 immunization programme, which has been criticized for its uncertain start.
This adds to the political risk is that the economic fallout from the pandemic could drag into the year and overshadow the build-up to the national election set down for September, with voters in six states also going to the polls in the coming months.
In addition, Thursday’s data highlighted the fact that a major task for governments in the coming 12 months is to try to rein in the budget deficit.
Germany posted its first budget deficit since 2011 in 2020 as a result of the economic crisis unleashed by the spread of the coronavirus.
The nation recorded a deficit last year of 4.8 per cent of GDP, its second highest since German unification in 1990.
