German economy contracts 1.7% amid COVID crisis | News | DW

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The German economy shrank 1.7% in the first quarter from the previous three months, official data showed on Friday.

The coronavirus crisis, which has forced prolonged business closures, is behind the country’s decline in economic performance, the federal statistics agency Destatis said.

What is behind the doldrums?

Household consumption has been the most affected by the latest round of coronavirus restrictions introduced in Germany, the statistics agency explained.

Many consumers moved their major purchases forward to the end of 2020. They did so after a temporary reduction in value added tax.

Bad weather also played a role, with Germany’s booming construction sector hampered by sub-zero temperatures throughout the winter.

Meanwhile, strong demand for German products, especially from China and the United States, has supported the country’s economy.

Economic data in figures

The figure, measuring gross domestic product (GDP), is lower than analysts’ forecast of a 1.5% contraction for the three-month period.

The first quarter result is down 3.3% from the previous year, when the coronavirus crisis first set in.

Compared to the fourth quarter of 2019, before the virus spread in Germany, Friday’s figure represents a contraction of 4.9%.

Europe’s largest economy had shown hopes of recovery after posting 0.5% growth in the last three months of last year.

Germany’s performance was also worse than first-quarter data from other major European economies earlier this week.

France announced a return to growth over the January-March period to 0.4%. Italy suffered a contraction of 0.4% and Spain of 0.5%.

What are the economic prospects for Germany?

However, Germany raised its growth forecast for 2021 this week.

Economy Minister Peter Altmaier said the government now expects GDP to grow 3.5% this year, down from a previous forecast of 3%.

Experts expect the economy to pick up in the second half of the year as more people are vaccinated and restrictions are relaxed.

But most analysts don’t expect the country to return to normal economic life until next year.

kmm / rt (AFP, dpa)


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