The German economy has shrunk by as much as 1 percent in the last three months of last year, as the latest coronavirus restrictions and supply chain bottlenecks have kept output below pre-pandemic levels.
The Federal Statistical Office on Friday released initial estimates showing that Europe’s largest economy managed 2.7 percent growth last year, despite fourth-quarter output falling between 0.5 and 1 percent from the previous quarter.
The figures point to a recovery from 2020, when Germany’s gross domestic product shrank by 4.6 percent in a record post-war recession caused by the Covid-19 crisis. But the country is behind other major economies, including the US, France and the UK, which have recovered above pre-pandemic production levels.
Georg Thiel, president of Destatis, the German statistics agency, said the country’s GDP remained 2 percent below pre-pandemic levels. “Despite the ongoing pandemic situation and increasing supply and material bottlenecks, the German economy was able to recover after the downturn in the previous year, although economic output had not yet reached the level before the crisis.”
Germany’s large manufacturing sector has been hampered for months by supply chain delays and shortages of materials such as semiconductors. Its larger service sector is also hampered by new restrictions to contain a record boom in coronavirus infections.
“The last quarter of 2021 was likely to be weak given the necessary constraints in contact-intensive services and manufacturing problems in manufacturing due to persistent supply constraints,” the German Ministry of Finance said in a statement.
Economists expect the German economy to recover strongly later this year as soon as coronavirus restrictions are lifted and supply bottlenecks are eased. But they are worried that if the problems continue, the country could slip into a recession – defined as two consecutive quarters of declining GDP.
Carsten Brzeski, head of macro research at ING, said: “The annual numbers hide a contraction in the economy in the last quarter of 2021, emphasizing the high risk that the economy will be in a complete recession by the beginning of the year. decay.”
The Bundesbank last month, it cut German growth forecasts, but said it still expects the economy to recover above pre-pandemic levels of GDP in the coming months with 4.2 percent growth in 2022, driven by a “surge in private consumption”, as well as higher exports and business investment.
“From the early summer, we expect a strong economic recovery again with the seasonal decline in corona,” said Jörg Krämer, chief economist at Commerzbank. “This is also supported by the fact that manufacturing order books are fuller than any time since statistics began in the early 1960s.”
Destatis said output in the country’s manufacturing sector remained 6 percent below 2019 levels last year, while the deficit in the sports, culture and entertainment sector was 9.9 percent.
This was partly offset by a recovery in the public sector, which was boosted by increased government spending, as the country’s budget deficit increased slightly to € 153.9 billion last year, the second highest since the country’s reunification more than 30 years ago.