German economy set for ‘severe contraction’ in second quarter
The German economy is set for a severe contraction in the second quarter of the year, a new report from the state Bundesbank has said.
Despite a gradual easing of the most crippling restrictions on everyday life, economists expect the country’s recovery to be halting and timid.
Across Europe as a whole, countries are expected to be dealing with the fallout from the crisis well beyond this year.
The report said: “Despite the easing measures that have been introduced, social and economic life in Germany is still very far from what was previously considered normal.
“The available economic indicators paint a correspondingly bleak picture”.
In the first quarter, the German economy shrank at its fastest pace since the 2008-2009 financial crisis.
German GDP dropped 2.2 per cent in the first quarter compared to the final three months of 2019.
It was the second largest drop since German reunification in the early 1990s.
However, as the first quarter only covered the initial few weeks of lockdown restrictions, the next set of figures could be far worse as they will include April, when almost all activity ceased.
The European Commission has predicted that Germany’s economy will shrink by 6.5 per cent in 2020, before rebounding 5.9 per cent the year after.
That is better than some of its neighbours, reflecting Germany’s relative economic strength and its less severe coronavirus outbreak.
In recent weeks, the country’s authorities have begun to ease lockdown measures, with shops beginning to reopen.
The country’s top football league, the Bundesliga, also restarted over the weekend just gone.
When relaxing the lockdown, chancellor Angela Merkel announced there would be an emergency brake to allow measures to be reimposed if infections climb again.
Social distancing rules will remain in place until at least 5 June.