Minimal plus in GDP: Still growth in the last quarter

Friday 29th January 2021

Minimal plus in GDP
But still growth in the last quarter

The last quarter of last year went so well for the economy that it ended up with a tiny plus – contrary to what many had feared. The draft horses were export and construction.

The German economy grew slightly at the end of the year despite the introduction of new corona restrictions. The gross domestic product (GDP) rose by 0.1 percent in the fourth quarter of 2020 compared to the previous quarter, as the Federal Statistical Office announced on the basis of preliminary data. In an initial estimate, the Wiesbaden authority had assumed that GDP would stagnate compared to the same quarter of the previous year. Activity was supported by exports and construction investments, but was negatively affected by private consumption. The Christmas business, which was affected by the lockdown, may have played a role here.

In 2020 as a whole, the German economy plunged into one of the deepest recessions in post-war history. According to preliminary data, the GDP shrank by 5.0 percent. There was only a stronger decline during the global financial crisis in 2009 when economic output slumped by 5.7 percent.

Quite a few economists, Europe's largest economy, are predicting a recovery this year. However, given the second lockdown, which was extended until mid-February, it is likely to be less severe than initially hoped. The upswing will continue in 2021, "albeit with less dynamism," said Economics Minister Peter Altmaier on Wednesday when the annual economic report was presented.

Economic expectations lowered

It can be assumed that the economy will be "significantly affected by the pandemic" in the first quarter, he added, pointing out that, given the high number of infections, the situation is still serious and the threat posed by the virus mutant is not yet over. At the same time, the annual economic report, which the cabinet unanimously decided on Wednesday, states that the economy should pick up speed again if the situation stabilizes through the "vaccination of larger population groups" and the "removal of restrictions on public life". Federal Finance Minister Olaf Scholz emphasized on Wednesday that Germany was coming through the crisis "comparatively well" with a view to the other major European economies.

However, the federal government significantly lowered its economic forecast and is now expecting economic growth of 3.0 percent this year. In his autumn forecast presented at the end of October, the CDU politician had expected an increase of 4.4 percent. In view of the high number of infections, the federal and state governments decided to take drastic measures from November, such as the closure of restaurants and leisure facilities. The lockdown was tightened in mid-December.