Coronation consequences for the economy: the economy will collapse by five percent

Coronation consequences for the economy: the economy will collapse by five percent

The German economy contracted by 5 percent last year due to the Corona crisis. The downturn is therefore less severe than the recession in the financial and economic crisis of 2009.

Germany has slipped deep into recession due to the limitations of the Corona crisis. According to an initial estimate by the Federal Statistical Office, economic output fell by 5.0 percent last year. After adjusting for the calendar, there was even a decrease of 5.3 percent. The economy declined more strongly only during the global financial crisis in 2009, when gross domestic product (GDP) fell by 5.7 percent.

Statisticians thus confirmed what has been clear since the spring: that Germany slipped into a deep economic crisis last year. In March and April 2020, parts of the German economy actually came to a halt as a result of the pandemic. The situation was similar in many other large economies, borders were temporarily closed, torn supply chains.

Budget deficit again

Although the recovery took place in the summer, new restrictions on economic and social life took place in the autumn, given the growing number of infections. However, the borders remained open.

For the first time since 2011, Germany has run a budget deficit for the whole year. According to the Wiesbaden authority, the federal government, states, municipalities and social security funds spent 158.2 billion euros more than they received last year.

In relation to total economic production, the deficit was 4.8 percent. It was the second highest deficit since the reunification of Germany, surpassed only by a record deficit in 1995, when the Treuhand’s debts were taken over into the state budget.

Recovery this year

Given the continuing and tighter blockade in Germany and other European countries, economists expect that the expected economic recovery will not take place until the second and third quarters of this year. On the one hand, withheld demand is likely to dissipate, and on the other hand, hundreds of billions in aid from the government and the European Central Bank have a supportive effect.

It is therefore likely that 2021 will end in strong growth, although pre-crisis levels of macroeconomic activity are unlikely to be reached by the end of the year.

Deutschlandfunk informed about this topic on January 14, 2021 at 11:00

Mark James

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