The German economy will suffer the biggest slump in its history this year over the coronavirus crisis, the government warned today, pushing Europe’s top economy into a painful recession.
German gross domestic product (GDP) is expected to shrink by a record 6.3 per cent as demand for exports plummets and lockdown restrictions weigh on domestic consumption, Economy Minister Peter Altmaier said in Berlin.
A group of leading economists have also Germany will suffer a deep slump in the first half of this year but should rebound relatively quickly from the disruption of the virus outbreak.
The German Council of Economic Experts predict that the economy will shrink 2.8 per cent for the full year and rebound next year with growth of 3.7 per cent, although their report issued today acknowledged a high degree of uncertainty about the length of the restrictive measures that have shut down much of the economy.
‘We will experience the worst recession in the history of the federal republic’, which was founded in 1949, Altmaier said.
‘The effects of the coronavirus pandemic will push our economy into a recession after 10 years of growth’, he added.
German Economy Minister Peter Altmaier at a press conference to present the spring economic forecast outlining the impact of the coronavirus crisis today
Cars intended for export waiting at the port for loading in Bremerhaven, Germany. German GDP is expected to shrink by a record 6.3 per cent as demand for exports plummets
This year’s forecast drop in GDP is worse than during the global financial crisis in 2009, when Germany’s economy contracted by more than five per cent.
If the government’s projection is confirmed, 2020 will mark the biggest contraction since federal statistics authority Destatis began keeping records in 1970.
The government offered a glimmer of hope however, predicting that the economy would bounce back in 2021 and grow by 5.2 per cent as the virus impact wanes and businesses reopen.
Altmaier pointed out that the global economy as a whole is expect to tip into recession as the world battles the coronavirus fallout, with the International Monetary Fund predicting a worldwide contraction of 2.8 per cent in 2020.
Export champion Germany in particular will feel the pain from disruptions to supply chains and lower demand for made-in-Germany goods from abroad, he said.
This chart shows the daily number of deaths in Germany, which rose to 202 today. The peak of 315 deaths in a day was recorded on April 16
Customers waiting in front of an electronic store for a limited entry due to the coronavirus orders in Essen, Germany, today
Exports are expected to plunge by 11.6 per cent in 2020, according to the economy ministry.
Job fears and coronavirus restrictions that have kept shops and entertainment venues closed are set to weigh heavily on demand at home too, dealing a blow to the key growth driver of domestic consumption.
International demand and supply shocks will also sap appetite for producer goods in Germany, Altmaier said.
Overall, Germany’s imports are slated to fall by just over eight per cent this year – slightly narrowing the nation’s famously massive trade surplus as exports fall faster.
The worst of the virus impact will hit Germany in the second quarter, Altmaier said, before a rebound is expected to get under way.
Economic institutes recently forecast that Germany’s GDP would shrink by nearly 10 per cent between April and June, in what would be a historic low.
This graph shows the daily number of new coronavirus cases in Germany. Today’s figure of 1,304 was a slight increase from yesterday’s 1,144
Peter Altmaier (centre) giving a press conference today in Berlin to present the Grman government’s economic plan
The dire outlook is set to leave its mark on the country’s employment levels.
Germany has long enjoyed record-low unemployment at around five per cent, but this is expected to climb to 5.8 per cent this year.
To help cushion the blow for companies and workers, the German government has unveiled a massive rescue package worth over one trillion euros.
It includes state-backed loan guarantees, direct cash injections and schemes to put workers on reduced hours to avoid layoffs.
Altmaier said the economy would gather steam as the coronavirus restrictions are gradually lifted, with Germany taking the first cautious already by reopening some shops and schools.
But Altmaier warned against acting too hastily.
‘We can’t risk a second wave of infections,’ he said, adding that he was in favour of a step-by-step approach ‘if the [infection] numbers support it’.
‘This is a test of endurance,’ he said. ‘We can’t put the success we’ve achieved at risk.’
Germany has seen a worrying rise in its coronavirus infection rate after becoming one of the first countries in Europe to start easing lockdown measures.