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German economy shrinks 5 percent on virus hit in 2020

14 January 2021, MVT 18:26
(FILES) (COMBO) This combination of file pictures created on September 19, 2017 shows facets of German economy and industry (clockwise from top L, finishing with C): A melter putting sand on flowing steel at a furnace of German steel technology group Salzgitter AG (March 17, 2015 in Salzgitter), a woman passing a banner with columns of digits at the CeBIT technology fair (March 15, 2015 in Hanover), a baker holding a baking sheet with pretzels (November 18, 2014 in Nuremberg), a wind turbine next to an electrical offshore substation at the German offshore wind farm "Amrum Bank West" (November 4, 2015 near Helgoland on the North Sea), a cargo ship at the Burchard-Kai container terminal (July 20, 2017 in Hamburg), a construction worker walking over the construction site of the Humboldt Forum (May 9, 2017 in Berlin), a harvest worker cutting asparagus (April 3, 2017 in Schrobenhausen), a man looking out over the city skyline with the banking district in Frankfurt am Main (September 20, 2012) and a car of German car maker Volkswagen standing in the auto tower storage facility (March 14, 2017 in Wolfsburg). - Germanyís economy in 2020 suffered its biggest contraction since the 2009 financial crash, hit hard by the effects of the coronavirus pandemic, official data showed Thursday, January 14, 2021. German economic output shrank 5.0 percent, as "almost all economic sectors were markedly affected by the corona pandemic", federal statistics agency Destatis said. (Photo by AFP)
14 January 2021, MVT 18:26

Germany's economy in 2020 suffered its biggest contraction since the 2009 financial crash, hit hard by the coronavirus pandemic, official data showed Thursday.

Output shrank 5.0 percent year-on-year, as "almost all economic sectors were markedly affected by the corona pandemic", federal statistics agency Destatis said.

However, the data betters the government's own forecasts, which anticipated a decline of 5.5 percent.

The downturn comes after a "10-year growth period", Destatis said.

In 2009, in the midst of the financial crash, gross domestic product (GDP) plunged 5.7 percent.

The first wave of the pandemic caused the worst quarterly drop in GDP on record when output plummeted 9.8 percent, in the three months to June.

But the economy recovered, expanding 8.5 percent in the third quarter, before slowing down again on a resurgence of the virus in the autumn.

Manufacturing, which accounts for about a quarter of the economy, suffered particularly, along with the services sector, Destatis said.

Online trade improved as physical retail trade declined substantially, the agency said, while restrictions closing hotels, restaurants and bars led to a dramatic decline in hospitality.

Like its neighbours, the country of 83 million people has been hit hard by a resurgence in coronavirus cases, prompting the shuttering of bars, gyms, cultural and leisure centres in November, followed by non-essential shops in December.

But unlike during the first wave in the spring, the latest restrictions do not close Germany's export-oriented factories or manufacturing businesses, meaning they have had less impact on the economy than earlier in the year.

Month-on-month, industrial orders jumped 2.3 percent in November, according to Destatis data, while manufacturing production rose 0.9 percent.

Both indicators have been rising for several months, buoyed by a recovery in demand from China where the virus has been largely contained.

"The German economy was less affected by the second round of restrictions than by the first," Georg Thiel, president of Destatis said.

"As we have had a lockdown again since November, this result must also be seen as a positive surprise," Uwe Burkert, head economist at LBBW, said.

However, a difficult period remains for Europe's largest economy, after German Health Minister Jens Spahn told parliament on Wednesday the current shutdowns would probably be extended into February.

Chancellor Angela Merkel has warned that the country faces "tough weeks" until Easter in early April.

Frankfurt am Main, Germany | AFP

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