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Germany’s economy: The plague recession is not as bad as 2009.

The country’s Central Statistics Office on Thursday forecast the economy will shrink 5 percent in 2020 compared to the previous year, based on a temporary GDP estimate.By comparison, Europe’s largest economy shrank 5.7 percent in 2009. During the recession following the financial crisis

Almost every major sector except construction was affected by a decline last year.

Household spending fell and business investment shrank the most since the financial crisis. Exports and imports of goods and services fell for the first time since 2009, shrinking 9.9% and 8.6%, respectively.

But the lower-than-expected decline in GDP shows the value of Germany̵

7;s industrial backbone, which makes it less reliant on services and consumption than countries like the United States, Britain. France, Italy and Spain

“Clearly, the strength in the export-oriented manufacturing sector offset the impact of the disruption,” Commerzbank chief economist JörgKrämer wrote in a note to clients on Thursday.

The German government has shut down restaurants, bars and clubs for a second time since early November in an effort to contain the rising coronavirus infection. Unnecessary shops, services and schools were closed in mid-December and remained closed.

“Germany’s better performance reflects little disruption during the first wave of COVID-19, low tourism and service share in a strong export economy and support for the economy.” Generous finance, ”adds Andrew Kenningham, Head of Economics at Capital Economics.

Workers reassemble ID.4 at Volkswagen plant in Zwickau, Germany.  Motor vehicles are Germany's main export in 2019, according to official figures.
The German government approved a 130 billion euros ($ 158 billion) stimulus package in June to stabilize the economy and start recovery. Unemployment can also be controlled through short-term work programs. – It is subsidized by the state – allowing companies to reduce their working hours and wages.
The outbreak put an abrupt end to job creation after 14 years of relentless growth, according to the statistics agency. Germany laid off 477,000 people from 44.8 million in 2020, raising the unemployment rate to 4% .That’s a far cry from the United States where millions of workers are still unemployed and the unemployment rate stood at 6.7% in December.

However, the short-term outlook for Germany’s economy is less encouraging.

Release restrictions remain in effect and German Chancellor Angela Merkel warned this week that it could not be eased for weeks.

“At the moment it seems that the German economy will avoid being a black eye in the last quarter of 2020, but it is difficult to see how the same magic can be reused in the first quarter,” said Carsten Brzeski, head of economic research at the international level. The ING world wrote in the memo.

“Economic activity tended to decline again in the first quarter,” added Kenningham. “While manufacturers should benefit from continued strong external demand. But the scope of catch-up growth will be reduced as output draws closer to pre-epidemic levels.

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However, economists expect GDP to rise significantly as vaccines become more prevalent and warmer climates mean people spend more time outside the home where the virus is more easily spread.

The blockade will also boost savings in the country, which could further impact the economy if households spend some extra cash, said Commerzbank’s Krämer.

This will help German GDP return to pre-epidemic levels by the final quarter of 2021, six to nine months before the European economy widens, Kenningham added.

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