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Germany's recession wasn't as bad as 2009

January 14, 2021. Summarized by summa-bot.

Compression ratio: 47.4%. 2 min read.

Germany's economy held up better in the pandemic than it did during the global financial crisis, despite a second wave of lockdowns in the fourth quarter and the reversal of more than a decade's growth in employment and trade.

London (CNN Business)Germany's economy held up better in the pandemic than it did during the global financial crisis, despite a second wave of lockdowns in the fourth quarter and the reversal of more than a decade's growth in employment and trade.

The country's Federal Statistics Office on Thursday forecast a 5% contraction in the economy in 2020 compared to the previous year, based on provisional GDP estimates.

But the shallower than expected drop in GDP demonstrates the value of Germany's industrial backbone, which makes it less reliant on services and consumption than countries such as the United States, United Kingdom, France, Italy and Spain.

"Apparently, strength in the export-oriented manufacturing sector offset the effects of the lockdown," Commerzbank chief economist Jörg Krämer wrote in a note to clients on Thursday.

"Germany's outperformance reflects its comparatively light lockdown during the first wave of Covid-19, low share of tourism and hospitality in the economy, strong export sector, and generous fiscal support," added Capital Economics chief economist, Andrew Kenningham.

The near term outlook for Germany's economy is less encouraging, however.

"While it currently looks as if the German economy avoided a black eye in the final quarter of 2020, it is hard to see how it can perform the same magic again in the first quarter," Carsten Brzeski, global head of macro economic research at ING, wrote in a note.

Lockdowns have also boosted domestic savings, which could juice the economy further if households spend some of the extra money, said Commerzbank's Krämer.

That should allow German GDP to return to its pre-pandemic level by the final quarter of 2021, six to nine months before the wider European economy, Kenningham added.

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