Germany: Economy tips into recession in the first quarter

  •   18/05/2020 - 10h52
  •   DEHOUI Lionel

This weekend, all eyes are on Germany. This Friday, Berlin is well in the spotlight. After the news about the change of the President of the Constitutional Court, this Friday's news also deals with Berlin's economy in the first quarter (Q1). It must be said that over this period, the German economy found itself in recession while undergoing its sharpest decline since 2009. That is, since the global financial crisis.

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Germany: Economy tips into recession in the first quarter

The causes of this recession

The only reason for this sharp decline remains exclusively the containment measures adopted by Germany in the fight against Covid-19. This mainly involves the closure of businesses, but also of shops. What explains the first official value announced this Friday on the gross domestic product (GDP). Indeed, Germany's GDP fell by 2.2% in the first quarter of 2020. A figure in line with the Reuters consensus.

Information: Economists predict that the GDP of Europe's largest economy, Germany, will have to fall further in Q2. This is because the containment measures were mainly in force during the months of April and May in the country. Logically, the tourism and catering sectors as well as other sectors were shut down spontaneously.


Berlin in recession, but less suffering

It is important to note that Germany's suffering remains less than that of Italy and France. In the first quarter, the economy of the latter declined by 4.7% and 5.8% respectively. Indeed, Germany has been favoured by the decision of the 16 Länder in its territory. They simply allowed a few companies in the industry to continue to operate on the various construction sites. This represents 10% of the German GDP.

Angela Merkel's country thus recorded growth of 1.8% in March. For the fourth quarter of 2019, the figures are revised to a slight decrease of 0.1% against the previously announced stability. It is therefore clear that Berlin is in the midst of a recession, as shown by the two consecutive quarters in which GDP has remained in decline. The German Government does not intend to let the situation get any worse.


Rescue measures

With the sole aim of stopping the economic impact of the pandemic caused by Covid-19, Berlin has launched an economic support plan. The total execution amount of this plan is 750 billion euros and will lead to a first increase of the German public debt. This will start in 2013. Other measures are expected from the government and from the next month to guide companies in the recovery after the containment.


Figures announced by economists

Looking ahead to the first quarter of 2019, the Federal Statistical Office Destatis publishes German GDP contracted by 2.3%. This figure was put forward after the institute adjusted its seasonally adjusted data. It should be remembered that the same GDP was up 0.4% in the last quarter of 2019. According to economists, an average quarter-over-quarter decline of 2.2% was expected. They also expected GDP to decline by 2% annually.