Editor in chief at IamExpat Media
It was expected, but now the figures are in: Germany’s gross domestic product (GDP) shrank by 2,2 percent in the first quarter of 2020 - the sharpest quarter-on-quarter decline since the 2008 global financial crisis. The economists gave an even bleaker prognosis for the second quarter.
The coronavirus pandemic has pushed the German economy into a recession, the Federal Statistics Office announced on Monday, confirming initial projections that were released two weeks ago. Although the spread of coronavirus did not significantly affect economic performance in January and February, “the effects of the pandemic are serious for the first quarter of 2020,” said the statisticians.
The quarter-on-quarter decline is the sharpest since the 2008 global financial crisis and the second-sharpest since German reunification in 1990. According to Destatis, it was driven primarily by a 3,2 percent drop in consumer spending and a 6,9 percent drop in company investment in plant and equipment.
A 3,1 percent drop in exports and a 1,6 percent increase in imports were also partially responsible for the damage. Construction projects also declined 6,5 percent in March, according to seasonally adjusted figures.
With GDP expected to drop by a total of 6,3 percent in 2020, the federal government is anticipating the country’s worst recession since the Second World War. During the 2008 global financial crisis, GDP fell by 5,7 percent.
Germany’s export-dependent economy was already suffering prior to the coronavirus outbreak, with both Brexit and the US-China trade dispute causing financial instability. Industrial orders fell 9 percent between February and March 2020 and the economy recorded zero growth in the last quarter of 2019.
The federal government plans to adopt an economic stimulus package in early June, with the goal of boosting the economy as coronavirus restrictions gradually relax. The exact outline of the package is still being debated by the ruling coalition.