German first-quarter GDP data to give early taste of virus impact
Berlin (AFP) –
Germany is bracing for first-quarter GDP results on Friday that will give a first idea of just how badly the coronavirus is battering Europe's biggest economy.
The figures, however, will offer only a partial insight into the effects of the disease, since lockdown measures were introduced in mid-March, just two weeks before the end of the period.
But that will have been enough to take a chunk out of GDP, according to Factset analysts, who are predicting a 2.1 percent contraction -- the worst quarterly result since 2008 during the global financial crisis.
Like most European countries, Germany introduced sweeping restrictions on public life in an attempt to slow the spread of COVID-19, with production in many sectors brought to a complete standstill.
The measures remained in place throughout April, causing a huge drop in exports and in consumption of non-essential goods.
GDP is therefore expected to shrink much further in the second quarter: some experts are predicting a 10 percent contraction.
With the virus apparently under control and numbers of new infections looking relatively stable, Germany began relaxing lockdown measures earlier this month but the prospects for a swift recovery are looking increasingly bleak.
The German government is predicting a 6.3 percent contraction this year, which would be the worst recession since records began in 1970.
"After 10 years of growth, the effects of the coronavirus pandemic are leading our economy into recession," Economy Minister Peter Altmaier said in late April, adding that Germany was "facing major challenges, both economically and politically".
The German economy relies heavily on exports, which have been hit especially hard by the pandemic -- having already taken a battering in 2019 from international trade tensions and uncertainty around Brexit.
Industrial orders fell 9.2 percent in March from February, their steepest drop since records began in 1991, according to figures published by the national statistics office Destatis.
The auto industry is in especially dire straits: in March, car registrations collapsed 37.7 percent year-on-year -- the worst drop in three decades -- and car production plummeted 97 percent on-year in April.
- 'Faster and stronger' -
German airline Lufthansa has said it is losing a million euros every hour because of the drop-off in air traffic, while tourism giant TUI is planning to cut 8,000 jobs.
Germany has been gradually trying to kickstart its economy since the start of May, with most shops now open, and restaurants and tourism also taking tentative first steps.
And there is some optimism in the air, with Berlin predicting growth of 5.2 percent in 2021 and hoping production will return to 2019 levels a year later.
"It looks as though Germany will probably emerge from the crisis faster and stronger than most other Western countries," according to Carsten Brzeski, an analyst for the ING bank.
This is partly because Germany has been less affected by the pandemic than other countries, but also because "the federal government is spending more money to rescue to the economy than most other governments", Brzeski said.
Indeed, Germany has ditched its cherished policy of maintaining a balanced budget, introducing an ambitious programme of aid for businesses worth a total of 1.1 trillion euros ($1.2 trillion).
But the economy will only rebound if Germany's biggest trading partners are also doing well, according to Jens-Oliver Niklash, an analyst for LBBW bank.
What's more, Germany is "structurally weaker" than it was during the 2008 financial crisis, according to Brzeski. GDP was already stagnating in 2019, a symptom of the international uncertainty.
In a sign of more difficult times ahead, carmaker Volkswagen said on Wednesday that it would be suspending production once again on some lines that had only just reopened after restrictions were lifted: the demand for cars is simply not there.
© 2020 AFP