In the second quarter of this year, the German economy shrunk by a massive 10.1 percent compared to the first three months of 2020 as the crushing impacts from the coronavirus crisis become increasingly evident.
Germany’s statistics office said the GDP index adjusted for inflation, seasonally and calendar effects plummeted to 94.26 in the April to June period.
The office said: “Most recently, the chain index was lower at 93.19 in the fourth quarter of 2010, so that’s roughly 10 years ago.”
The huge crash in the April to June period was triggered by a massive collapse in exports and measures introduced in a desperate attempt to contain the coronavirus pandemic.
This will set alarm bells ringing in Germany as even in the worst three months of the financial crisis in 2009, the country’s economy shrank by less than five percent.
But prospects for the third quarter are slightly more encouraging, with early forecast appearing to show the economy could be beginning a recovery.
The Ifo index increase in July for a third successive month and showed an upswing for the first time since 2019.
A survey of industry managers revealed they are starting to view their prospects more positively, and many service providers even describe the situation as good rather than bad.
Construction companies are no longer expecting businesses to collapse as in June, largely bossted by the huge coronavirus recovery pacakage announced by the federal Government.
Despite the encouraging signs, The German Institute for Economic Research (DIW) warned it could take two years before the massive slump in the second quarter can be recovered.
DIW economic chief Claus Michelsen said: “The signs are clearly pointing to recovery.
“But despite strong growth, it will probably take two years before the historic slump in spring is made up for.”
There are also increasing fears in Germany that a second wave of coronavirus infections could blow another huge hole in the European Union’s largest economy.
This could trigger several businesses to go bankrupt, while exports are also at huge risk as the pandemic continues to ravage trade powerhouses such as the US, to which German companies regularly sell many goods.
Additional reporting by Monika Pallenberg.
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