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German economy shrinks by 5% in 2020 – VP Bank column

According to an initial calculation by the Federal Statistical Office, Germany’s gross domestic product (GDP) slumped by 5% last year. The decline was less severe than the 2009 decline when it was -5.7%.

Even though the economic slump is not quite as bad as originally feared, 2020 is sure to have its place in the history books. The containment measures severely affected entire areas of the service sector. It is largely thanks to the industry, which is doing well given the circumstances, that it did not get any worse.

The manufacturing sector is benefiting from the flourishing business in China. The German automobile manufacturers were even able to achieve new sales records in the Middle Kingdom. So in the middle of the crisis there was an isolated boom. Even retail sales were 4.1% above 2019 in real terms. The Covid-19 crisis has its very own anatomy.

The past year should now be checked off. The view goes forward. The current year promises improvement, even if it is initially a question of overcoming some pandemic hurdles. Germany can be thankful that it has an export-strong industry that is benefiting from the China boom. The order books, which are better filled again, will boost industrial production in the coming months.

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