German economy shrinks at fastest pace since financial crisis
The German economy shrank at its fastest pace since the financial crisis in the first quarter of the year, as the powerhouse of Europe was battered by the coronavirus pandemic.
German GDP dropped 2.2 per cent in the first quarter compared to the final three months of 2019. It was the second largest drop since German reunification in the early 1990s.
Destatis, the country’s statistics office, also revised down 2019’s final quarter GDP figures to a drop of 0.1 per cent. That means Germany’s economy is already officially in recession.
Economists have warned that the worst is yet to come, however. The first quarter GDP figures only capture a few weeks of coronavirus lockdown. Second quarter figures will cover April, when activity all but dried up.
Destatis said that the lockdown drove household spending to fall sharply in the first quarter.
Europe’s largest economy also saw both exports and imports drop markedly. This is a particular blow to Germany, which is focused on exporting expensive products like cars.
Destatis said that government spending “had a stabilising effect and prevented a larger GDP decrease”.
“The corona pandemic hits the German economy hard,” Destatis said.
“Although the spread of the coronavirus did not have a major effect on the economic performance in January and February, the impact of the pandemic is serious for the first quarter of 2020.”
The European Commission has predicted that Germany’s economy will shrink by 6.5 per cent in 2020, before rebounding 5.9 per cent the year after.
That is better than some of its neighbours, reflecting Germany’s relative economic strength and its less severe coronavirus outbreak.
France’s economy is predicted to shrink 8.2 per cent in 2020, while the UK’s is forecast to contract 8.3 per cent.
In the first quarter of the year, the UK economy shrank two per cent, compared to Germany’s 2.2 per cent drop.