Virus pushes Germany into recession

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German Finance Minister Olaf Scholz speaks during a press conference to present the tax estimate in Berlin, Germany, on May 14, 2020
German Finance Minister Olaf Scholz speaks during a press conference to present the tax estimate in Berlin, Germany, on May 14, 2020

THE coronavirus pandemic has tipped Germany into a recession, official data showed Friday, with Europe’s top economy suffering its steepest quarterly contraction in more than a decade as lockdown measures began to bite.

The German economy shrank by 2.2 percent in the first quarter of 2020, federal statistics agency Destatis said, calling the quarter-on-quarter decline “the worst since the global financial crisis” in 2009.

The agency also revised its gross domestic product (GDP) figure for the final quarter of 2019 from zero growth to a contraction of 0.1 percent. That means Germany has now experienced two consecutive quarters of decline, meeting the technical definition of a recession.

The worst is yet to come however, with economists warning that the full impact from the coronavirus restrictions will be felt more in the second quarter.

Economy Minister Peter Altmaier last month warned that Germany was headed for “the worst recession” in its post-war history as the pandemic brought huge swathes of the economy to a standstill.

Like other European countries, Germany closed factories, shops, schools and restaurants from mid-March and asked workers to stay at home to help curb the outbreak.

The export-reliant powerhouse was also hammered by travel curbs and supply chain shocks worldwide.

“Private consumption, exports and investments in equipment shrank considerably as a result,” the German economy ministry said in a statement.

State spending and the construction industry were the only growth drivers in the first three months of the year.

“Two weeks of lockdown as well as supply chain disruptions… brought the German economy to its knees,” noted ING-Diba economist Carsten Brzeski.

“For the time being, things will get worse before they get better,” he added.

Some experts have forecast the German economy could contract by a whopping 10 percent between April and June.

The German government expects GDP to shrink by a record 6.3 percent in 2020, a bigger slump than during the global financial crisis in 2008/2009.

Guardian

 

– May 15, 2020 @ 14:15 GMT /

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