COVID-19 inflicts historic blow on German economy as GDP plunges by 7%

Tue, Aug 25, 2020
By editor
2 MIN READ

Foreign

THE coronavirus pandemic on Tuesday inflicted a historic blow on Germany’s economy in the second quarter, when Gross Domestic Product (GDP) collapsed by 9.7 percent as the state struggles to come out of the crisis.

The quarterly fall in GDP was a slight improvement on the Federal Statistical Office’s (Destatis) first estimate of 10.1 percent for the April-June period when restrictions to stem virus spread hit Europe’s largest economy with full force.

The single-digit plunge was still, however, far worse than seen at the peak of the financial crash more than a decade ago, when the German economy contracted by 4.7 percent in the first quarter of 2009.

However, as a result, it was the worst drop since records began in 1970. According to Destatis, stimulus measures designed to support consumers and businesses through the worst of the crisis resulted in the state spending 51.6 billion euros more than it took during the first half of 2020.

It added that measured as a percentage of GDP, the fiscal deficit came in at 3.2 percent. In the same period in 2019, a surplus of 2.7 percent was recorded.

Meanwhile, Germany last recorded a fiscal deficit for the entire year in 2011.

However, general government revenue was down by 3.6 percent in the first half of 2020, marking the first year-on-year decline since 2010. This came as government expenditure soared by 9.3 percent.

Economists expect the economy to recover in the latter half of the year, provided that Germany can prevent a second wave of infections.

The German Government has forecast a 6.3-per-cent economic decline for the entire year. The restrictions put in place to stem the virus have been gradually eased or lifted across the country since May.

However, at the beginning of the pandemic in March, the German Government pushed through a multibillion-euro coronavirus aid package, followed by another 130 billion euros in stimulus in June to tide the economy over into 2021.

Eurozone countries are supposed to keep deficits under 3 percent of GDP, and public debt below 60 percent of GDP, but budget rules were suspended in the wake of the pandemic. (dpa/NAN)

– Aug. 25, 2020 @ 12:49 GMT |

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