Germany’s GDP contracted by 2.2% in the first quarter of 2020 from the previous quarter, as the coronavirus pandemic dented Europe’s largest economy. On the year, the economy contracted by 2.3%.
This was the largest quarterly decline since the first quarter of 2009, during the height of the global financial and economic crisis, and the second largest drop since German reunification in 1990, according to the Federal Statistics Bureau on Friday. The bureau also revised down its fourth-quarter GDP reading to -0.1%, meaning the economy is already in recession.
“Things will get worse before they get better, said ING chief economist Carsten Brzeski in a note. “If today’s data are the result of two weeks of lockdown, three more weeks of lockdown and a very gradual lifting of some measures do not bode well for the second quarter.”
The Munich-based Ifo economic institute forecasted a drop of 12.2% in the second quarter, revised down from their previous estimate of a 9.8% drop.
Data coming out of Europe’s largest economy has been gloomy for the past several months, unsurprisingly since the spread of coronavirus first in China, Germany’s most important trading partner, and then across Europe shattered supply chains. Nationwide lockdowns from mid-March effectively killed consumer demand.
The government predicts that exports will be down by 11% year-on-year in 2020, and economic growth this year will shrink to minus 6.3%, which will constitute the worst recession for the country since the Second World War.
New industrial orders in Germany in March plunged by over 15.6% from February for the biggest slump since 1991.
Under pressure from state leaders keen to boost their economies, chancellor Angela Merkel last week handed them the responsibility for making their own strategies to ease the lockdowns, for the promise that they will re-impose tight, localised lockdowns if there are fresh spikes in the infection rate.
Germany will re-open its borders with Austria, France, Switzerland, and Luxembourg from Friday, and the rest of its borders by the middle of June.
According to Johns Hopkins University data, Germany has so far confirmed 174,000 cases of coronavirus, and 7,884 deaths from COVID-19.