Production line automotive industry

German economy hit hard by coronavirus pandemic in 2020

Initial figures from the Federal Statistical Office (Destatis) indicate that German economic output slumped in 2020, with price-adjusted gross domestic product (GDP) 5.0% down on the previous year. According to the Federal Statistical Office’s press release, this means the German economy suffered a deep recession in 2020, a year overshadowed by COVID-19, bringing to an end a ten-year run of growth. The situation, Destatis writes, is similar to the 2008-09 financial and economic crisis. However, the Federal Statistical Office’s preliminary calculations suggest that the economic downturn in 2020 was somewhat less severe than that of 2009, which saw economic output shrink by 5.7%. GDP expanded at a rate of 0.6% in 2019.

Full-year 2020 data are based on preliminary estimates for the fourth quarter; initial data for Q4 are expected to be released on 29 January 2021.

Industry and services particularly affected

The statisticians at Destatis report that the coronavirus pandemic left a clear mark across almost the entire economy. Manufacturing, for instance, shrank by just over one-tenth, while services saw a particularly severe slump in the trade, transport, and accommodation and food services sectors, where economic performance declined on the year by a price-adjusted 6.3% overall. The Federal Statistical Office notes that online trade moved in the opposite direction, registering substantial increases, unlike some parts of bricks-and-mortar retail trade. The coronavirus pandemic also took its toll on demand, with consumption expenditure dropping by an unprecedented 6%. Only increases in government final consumption expenditure (3.4%) and construction investment (1.5%) softened the decline in demand to a degree.

Foreign trade suffers steep decrease

The COVID-19 pandemic had a massive impact on foreign trade as well. The year 2020 saw exports and imports decrease for the first time since 2009, with exports dropping by a price-adjusted 9.9% and imports of goods and services by 8.6%. Imports of services in particular saw a major decline owing to the sharp fall in tourism.

Germany’s efforts to combat the coronavirus crisis left general government with its first financial deficit (net borrowing) since 2011. Provisional calculations indicate that, taken as a whole, central, state and local government and social security funds closed 2020 with a deficit of €158.2 billion, which equates to a deficit of 4.8% of GDP. The Federal Statistical Office reports that this is the second-highest deficit since German reunification.