German economy is shrinking, but -5% is still okay | Financial

The corona crisis is the cause of the bad outcome. The virus forced the country into lockdown, factories closed their doors and exports faltered. For example, the demand for cars fell. German consumers did not let the money roll either, and companies delayed investments.

Trading partner

The figure is a first estimate by the German statistical office. It is the worst result since 2009, when the largest economy in the eurozone, and the most important trading partner of the Netherlands, contracted by 5.7%.

We will know how the Netherlands got through the corona year on 16 February. Then the Central Bureau of Statistics will publish the figure for the fourth quarter. In the first three quarters, our economy shrank by 4.1% compared to 2019. In November, the CPB took into account a crape of more than 4% in 2020. In 2021, our economy should grow by almost 3% again.

Still, Germany outperformed most other European countries, ING economist Carsten Brzeski writes in a response. According to him, this is because the lockdown was relatively light and modest. It also helped that Germans went on holiday in their own country, and the German government reached deep into their pockets to support the economy.

China

However, the outlook for Germany is still bleak. Chancellor Merkel expects the lockdown to last until the beginning of April. The one-off effect of factories building up stocks is also off the charts, and demand from China in the first quarter is slowing due to the Chinese New Year.

Brzeski therefore thinks that Germany narrowly escaped a double dip in the fourth quarter of 2020. “But it will be difficult to repeat that trick in the first quarter.”

In any case, it is difficult to predict when the recovery will continue, according to the German economic institute IFO. “That largely depends on how long and how severe the measures are to contain the virus. Suppose retailers are allowed to open in February, and the lockdown for hotels and the rest of the services sector ends in March. Then we expect the gross domestic product to increase by 0.5% in the first quarter, ”says Timo Wollmershäuser of the institute. “And if consumers have shaken off the pandemic in the summer, for example because the vaccination program is running well, the German economy could grow by 4.5% in 2021.”

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