Bundesbank: "Signals are encouraging": Lockdown will not overturn the German economy

Monday, January 18, 2021

Bundesbank: "Signals are encouraging"
Lockdown does not upset the German economy

The spread of the coronavirus and the tightened containment measures are slowing down the recovery of the German economy, but according to the Bundesbank it will not overturn it. Their resilience is so great that confidence is the order of the day. However, this is followed by a big but.

According to the Bundesbank, the German economy is proving its resilience even in the tightened lockdown. There are "encouraging signals" that give reason to hope that "even the restrictions that were extended and tightened at the beginning of the new year will not set the economic recovery back too far," wrote the central bank in its January monthly report.

The Bundesbank economists justify their confidence in the published report with the development in the final quarter of 2020. Like the Federal Statistical Office, the Bundesbank assumes that real gross domestic product (GDP) "roughly stagnated" in the fourth quarter of the past year.

The spread of the coronavirus and the renewed tightening of measures to contain the pandemic slowed the recovery of the German economy. The Bundesbank explained that the fact that there was no major economic setback was due, among other things, to the fact that some economic sectors that were not directly affected by the measures continued to recover.

Above all, the industry should be mentioned. According to the figures available up to November, production there had risen sharply. Construction has also grown significantly. And even in retail, sales were still rising before many stores closed in December.

"There could still be a noticeable setback"

In 2020 as a whole, according to an initial estimate by the Federal Statistical Office, Germany's economic output slumped by 5.0 percent compared to the previous year. After this deep recession, several economists, Europe's largest economy, are predicting a strong comeback in the current year.

However, there are still considerable uncertainties, which the Bundesbank also points out: "If the infection rate … does not subside significantly and the current restrictions on economic activity last longer or are even tightened, there could … be a noticeable setback . "