German economy shrank 5% in pandemic year 2020

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FRANKFURT, Germany (AP) – Germany’s economy, Europe’s largest, shrank 5% in pandemic year 2020, ending a decade of growth as lockdowns wiped out much of business and consumer activity.

Sad as the numbers were, the drop was smaller than many expected, and a high savings rate suggested consumers might be ready to trigger a strong economic recovery when the lid finally comes off.

The national statistics office Destatis said on Thursday that only the construction sector was showing a recovery, with industry and services seeing deep declines. Agriculture, financial services, real estate, and information and communications suffered smaller production declines.

Looking ahead, the stage could be set for a substantial economic rebound as consumers may be ready to spend once the pandemic has subsided, having raised their savings rate to a record high of 16.3% in 2020. Albert Braakmann , head of the economic and price estimates group, said consumption “could increase dramatically”.

Economy Minister Peter Altmaier has said that once the pandemic is contained, growth will be “clear and noticeable” in 2021. The government estimate of 4.4% for 2021 growth is due to be updated on January 27.

The German economy has done better than several others in the 19 countries of the euro area because it was supported by the manufacturing sector, which was less affected than the services. The decline was smaller than in France, which, according to European Commission estimates cited by Destatis, fell 9.4%, Italy, which was down 9.9%, and Spain dependent on tourism, 12.4%. Official figures for these countries are expected in early February.

The United States saw a decline of 4.6% while the Chinese economy grew 2.1%, according to estimates used by Destatis.

In the fourth quarter, German growth “pretty much stagnated,” said Michael Kuhn, head of the agency’s GDP and output calculations group. He said that since very little data was available for December, when the last round of lockdowns occurred, the agency was not making an official estimate. The fourth quarter figure will be announced on January 29.

The pandemic slowdown, which followed 10 consecutive years of annual growth, was less than that of 2009, when the economy shrank 5.7%. The 2020 figure compares to a modest 0.6% growth in 2019.

In 2020, the economy oscillated between lockdowns and a robust recovery that again left growth below the previous year. The worst quarter, the second, was down 9.8% quarter-on-quarter, followed by an 8.2% rebound in the third. Unemployment was only contained in Germany and many other European countries with strong state support, such as the payment of wages for workers on leave.

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