The German economy, Europe’s largest, shrank by 5 per cent last year, following ten years of growth as lockdowns hit most businesses and consumer activity. The government’s statistics agency Destatis said only the construction sector showed an upturn as industry and services saw deep declines. Agriculture, financial services, real estate and information and communication suffered smaller drops in output.
The fall was smaller than expectations, and consumers might be ready to spend once the pandemic recedes, having increased their saving rate to a record high of 16.3 per cent during 2020, setting the stage for a substantial economic rebound.
Albert Braakmann, head of the group for economic estimates and prices, said consumption ‘could increase significantly’. Once the pandemic was contained, growth would be ‘clear and noticeable’ in 2021, said economy minister Peter Altmaier. The government’s estimate of 4.4 per cent for this year growth will be updated on January 27.
Germany’s economy did better than several others in the 19-country eurozone as it was supported by manufacturing, which has taken less of a hit than services. The downturn was smaller than in France, which according to European Commission estimates cited by Destatis, shrank 9.4 per cent; Italy, which was down 9.9 per cent; and tourist-dependent Spain, off 12.4 per cent.
The United States had a downturn of 4.6 per cent while China’s economy grew 2.1 per cent, according to Destatis estimates.
In the fourth quarter, German growth ‘roughly stagnated’, said Michael Kuhn, head of the GDP and output calculation group at the agency. He said that since very little data was available for December, when the latest round of lockdowns hit, the agency was not making an official estimate. The fourth-quarter figure is to be announced on January 29.
The pandemic downturn, which followed 10 straight years of annual growth, was smaller than that experienced during 2009, when the economy shrank by 5.7 per cent. The 2020 figure compares to modest growth of 0.6 per cent in 2019.
Unemployment has been contained in Germany and many other European countries only by extensive state support like paying the salaries of furloughed workers.