The German economy shrank 2.2 percent in the first quarter, the most in more than a decade, offering an early flavor of the damage from the COVID-19 pandemic.
Less than two weeks of official lockdown caused slumps in consumer spending and capital investment, but government spending and construction provided some stabilization.
A 3.8 percent slump in the eurozone economy led to the first fall in employment since 2013.
A revision to Germany’s fourth-quarter performance means Europe’s largest economy is already in a recession. With restrictions to contain the pandemic only slowly being lifted, the economy is set to suffer much more in the three months through June.
The German government has already mobilized about 1.2 trillion euros (US$1.3 trillion) to support German businesses, and is working on additional tools to kickstart the economy. More than 370,000 people lost their jobs last month alone, and a program where the state compensates large parts of wages lost when businesses cut workers’ hours has received applications for more than 10 million staff.
German Minister of Finance Olaf Scholz on Thursday promised a stimulus program early next month that would focus on investing in a “modern and climate friendly future.”
Even though the situation is dire, Germany is not faring as poorly as much of the rest of the eurozone. France, Italy and Spain all registered first-quarter falls of about 5 percent. The Dutch economy shrank 1.7 percent.
That is partly because German containment measures were comparatively light and only took effect on March 23, later than in other countries. There is also the economy’s reliance on manufacturing and trade, sectors that have been weathering the crisis slightly better than the services and tourism industries that are dominant in Europe’s south.
Projections for Germany — as well as the eurozone — are highly uncertain and largely depend on how the outbreak develops. The region’s largest economy is on track for its worst recession since World War II, with the European Commission predicting a decline in output of 6.5 percent this year.
The German Ministry for Economic Affairs and Energy yesterday expressed confidence that the nation has already seen the worst of the coronavirus slump.
“The recovery began with the cautious lifting of the lockdown at the beginning of May,” it said in an e-mailed statement. “But this process will take a longer time due to the continuation of the corona pandemic.”
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