Coronavirus lockdown impact: German economy shrank by 5% in 2020

Europe’s biggest economy shrunk by 5% last year, with large parts of economic and public life having been shut down across much of 2020.

However, the figures from Germany’s Federal Statistical Office (Destatis) published on Thursday showed the economy fared relatively well compared with some other European nations, thanks in part to the country’s resilient manufacturing base.

The drop in gross domestic product (GDP) was also smaller than analysts had predicted and less severe than the record contraction of -5.7% in 2009 during the global financial crisis.

The COVID contraction

The manufacturing sector is thought to have partly offset a slump in the service sector, with industry having rebounded strongly from the lockdown launched in March and April. Despite this, the restrictions did have an impact across the board.

“Almost all economic sectors were markedly affected by the coronavirus pandemic,” Destatis said.

The slump is significant after Germany’s economy grew by 0.6% in 2019. However, it compares favorably with predictions for France, Italy and Spain, where the European Central Bank forecasts GDP to have declined by 9.3%, 9.0% and 11.1%, respectively.

Production has largely been excluded from Germany’s latest lockdown measures introduced in November and extended to the end of January. Anti-coronavirus steps have instead been principally aimed at curbing infections via the service sector and private sphere.

Factories have stayed open during the more recent shutdowns, allowing production lines to keep rolling.

As hope spreads that new vaccines will help the world put the coronavirus in the rear view mirror, Germany’s leading DAX index reached a new high of just over 14,000 points on Thursday before it dropped to 13,968.24.  

Figures released earlier this month show that Germany’s labor market remained stable in December.

The government ordered most nonessential businesses to close over the Christmas period, prompting employers to tap a state scheme that allows them to slash working hours and avoid layoffs.