This morning the Federal Statistical Office published an initial estimate of Germany’s macroeconomic development in 2020 at a press conference. Accordingly, as expected, the corona pandemic caused a significant slump in economic output. Real gross domestic product (GDP) decreased by -5.0% after + 0.6% in 2019. Calendar and seasonally adjusted, the minus was even stronger at -5.3%.
Over the year as a whole, value added fell particularly markedly in manufacturing (-9.7%), in some service sectors and in trade, transport and hospitality (-6.3%). The burdens from the corona crisis are also reflected on the usage side. Private consumption slumped significantly by -6.0%, which is largely due to the fact that some consumption options have ceased to exist. The savings rate rose accordingly in 2020 from 10.9% (2019) to 16.3%. With these unusually high savings, private households have built up a cushion that is likely to have an impact on demand after the pandemic has been overcome, at least in part due to pent-up consumption.
Investments “only” decreased by 3.5%, thanks to further expansion in construction investments (+ 1.5%). In contrast, companies invested considerably less in equipment in 2020 (12.5%). Foreign trade was also dominated by the global pandemic, with both exports (-9.9%) and imports (-8.6%) falling significantly. Government consumer spending (+ 3.4%) had a supportive effect. The fiscal measures to shield against the crisis are reflected in a significant widening of the general government funding deficit. After eight years with sometimes significant surpluses, the corona crisis caused a deficit of 158 billion euros or 4.8% of the gross domestic product. In an international comparison, Germany is still doing relatively well.
Not all data was yet available for the figures reported today; estimates had to be used for December. The statisticians are assuming stagnation in the fourth quarter, mainly thanks to robust developments in industry and construction. Most companies are also likely to have been better prepared for the second wave, there were no disruptions to the supply chains, and foreign demand also supported. In the final quarter, the rapid economic catch-up process was interrupted, but a relapse into recession was probably avoided. However, the current quarter will be weak, especially since an extension of the hard lockdown over the entire winter months is becoming increasingly likely.
The further outlook for 2021 is optimistic. Just because of the more favorable weather conditions, a strong increase in economic activity can be expected from spring – provided that there are no setbacks in vaccinations. The pre-crisis level should be reached again by the end of 2021. For 2021, we expect GDP growth of around 3.5%. In 2022, economic output should even grow by a good 4%. Until the pandemic is completely overcome, support from fiscal and monetary policy remains necessary.
Conclusion: The corona pandemic has left its mark on the economy as a whole. As expected, real gross domestic product recorded a drop of 5.0% in 2020 compared to the previous year. The positive message is that despite the second lockdown, economic output apparently “only” stagnated in the fourth quarter. Industry and construction have recently developed robustly and support the overall economy. The next few weeks will be very difficult again because of the infection rate and the hard lockdown, but we expect an accelerated recovery from spring onwards, which should continue well into 2022 (GDP forecast 2021: 3.5%). The basic requirement for this is overcoming the pandemic. From an economic point of view, it is therefore crucial that the path to vaccination coverage is taken quickly and consistently.