The German economy has shrunk at the fastest pace since the financial crisis more than a decade ago as the lockdown imposed to combat coronavirus brought many activities to a standstill, plunging Europe’s largest economy into recession.
German first-quarter gross domestic product shrank 2.2 per cent from the previous quarter, slightly less than most economists had expected and better than many eurozone economies, the national statistics agency said on Friday.
It is the biggest quarterly decline in German GDP since the first quarter of 2009, when it shrank 4.7 per cent in the wake of the financial crisis.
The statistics agency also revised down its fourth-quarter GDP figure from zero to a decline of 0.1 per cent, meaning that Germany is now officially in recession, which is defined as two consecutive quarters of negative growth. It said its initial estimate for the first quarter was likely to be subject to “larger revisions than usual” due to disruption from the virus.
German industrial production tumbled by a record 11.6 per cent year-on-year in March, when the lockdown forced factories to close and workers to stay at home.
But so far Germany has suffered less than other major European economies, which imposed stricter lockdowns. The 19 countries in the eurozone suffered an overall 3.8 per cent contraction in the first quarter, preliminary data published last month showed. France’s economy did worst, shrinking by 5.8 per cent. Spain contracted by 5.2 per cent in the period and Italy’s GDP fell by 4.7 per cent.
The German statistics agency said on Friday that both household spending and investment in machinery and equipment fell sharply in the first quarter, but resilient government spending and construction activity “had a stabilising effect and prevented a larger GDP decrease”. Both imports and exports “saw a strong decline”, it said.
Germany’s regional governments have been steadily easing their lockdowns this month, but economists say that despite this, the country is set for a record recession in the second quarter. Deutsche Bank forecast the country’s economy would shrink by 14 per cent in the April-to-June period and even after rebounding slightly later it would still end the year 9 per cent smaller.
“Looking ahead, things will get worse before they get better,” said Carsten Brzeski, economist at ING. “Incoming data will be worse, even though the worst might already be behind us.”
German social and economic activity fell to 60 per cent of its January level during the peak of the lockdown, but has already returned to more than 80 per cent, he added.
Berlin said on Thursday that the coronavirus crisis had blown a hole in the country’s public finances. This year’s tax take is set to fall by €81.5bn compared with 2019 — a 10 per cent decline — even as spending ramps up and the government plans to take on €150bn of extra debt.
Europe’s largest economy had already been slowing before coronavirus struck. It barely grew at all in the last nine months of 2019 as its sprawling manufacturing sector was hit by the US-China trade war, turmoil in the carmaking sector and Brexit uncertainty.
“The lockdown is being eased in May and June, but only gradually, and Germany’s recovery will be constrained by the problems elsewhere in Europe,” said Jack Allen-Reynolds, economist at Capital Economics.
With one of the continent’s most open economies — exports account for almost half of German GDP — it is likely to be hit harder by the expected record drop in global merchandise trade.
Olaf Scholz, Germany’s finance minister, said on Thursday that after deploying public funds to help workers and companies, “the next step will be to reinvigorate the economy with targeted measures, so that industry, trade and commerce can get back into gear as [the shutdown] is eased”.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50L2Y3NTA3MjYwLTE0MDctNDI5My1iYzg5LTlmYTA0YjIxODY0MNIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50L2Y3NTA3MjYwLTE0MDctNDI5My1iYzg5LTlmYTA0YjIxODY0MA?oc=5
2020-05-15 09:17:06Z
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