Germany’s economy is shrinking in the fourth quarter as inflation continues to grow

The German economy plummeted to 1 percent in the last three months of last year, as recent coronavirus restrictions and online threats led to a pre-epidemic decline.

The Federal Statistical Office on Friday released preliminary figures showing Europe’s largest economy achieved 2.7% growth last year, although the fourth quarter fell by 0.5 and 1 percent from the previous quarter.

These figures show a sharp increase since 2020, when the German economy dropped by 4.6 percent in the post-war recession due to the Covid-19 crisis. But the country is lagging behind other major economies, including the US, France and the UK, which are much more numerous than before the epidemic.

Georg Thiel, President of Destatis, a German accounting agency, said the country’s GDP remained 2 percent below the epidemic. “Despite the growing epidemic and the financial crisis, Germany’s economy began to decline again last year, although the economy has not yet come to a standstill.”

Growth would have been lower without additional funding from a license issued by German vaccine manufacturer BioNTech, which boosted GDP overall by 0.5 percent last year, according to Destatis.

A large part of German manufacturing has been disrupted for several months due to a shortage of materials and a shortage of materials such as semiconductors. Much of its work is also hampered by new restrictions on the prevalence of coronavirus infections.

“The last quarter of 2021 may have been weakened by a ban on job-related issues and manufacturing problems due to domestic crisis,” the German finance ministry said.

Economists expect Germany’s economy to plummet by the end of this year if the coronavirus ban is lifted and it poses a challenge. But he worries that if the crisis continues, the country could fall into a trap – which means two consecutive quarters of GDP fall.

Carsten Brzeski, chief research officer at ING, said: “The annual figures undermine the economy by the end of 2021, emphasizing that the high risk of economic collapse falls at the beginning of the year.”

The Bundesbank last month cut off its German forecast but said it still expects the economy to rise above GDP ahead of the epidemic in the coming months by 4.2% growth in 2022, encouraged by “increased securities”, as well as rising exports and trade.

“From early summer onwards, we expect an economic recovery due to climate change,” said Jörg Krämer, an economist at Commerzbank. This is further supported by the fact that import orders are more complete than at any time since statistics began in the early 1960s.

Destatis said the country’s production last year remained at 6 percent below 2019 levels, while sports, cultural and leisure activities were 9.9%.

This was slightly reversed by the repatriation of government agencies, which was boosted by government spending, as the country’s budget cuts increased slightly to € 153.9bn last year, the second highest since the reunification of the country 30 years ago.

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