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German Economy Shrinks 10.1% in Q2, but It’s Not All Bad News

July 31, 2020, 02.14 PM

FRANKFURT AM MAIN, – The coronavirus pandemic contributed to the German economy shrinking by a record 10.1 percent in the second quarter, based on official data presented on Thursday.

Despite the lackluster economic performance resulting from the coronavirus pandemic, experts are optimistic that a recovery in the Germany economy is already underway.

Federal statistics agency Destatis called the quarter-on-quarter decline in gross domestic product "historic."

The record-breaking decline was also much bigger than any slump seen during the 2008-2009 financial crisis.

Economy Minister Peter Altmaier had warned earlier this year that the coronavirus pandemic would push Europe's top economy into "the worst recession" in its postwar history, ending a decade of growth.

Thursday's figure, however, surprised analysts who had forecast a contraction of around nine percent for the April-June period.

Destatis said efforts to contain the virus outbreak had triggered "a massive slump" in both exports and imports, although government spending had increased over the period.

But the worst pain may already be over.

Germany appears to have withstood the coronavirus shock better than many of its neighbors so far and began reopening factories, shops and restaurants in early May, allowing economic activity to pick up again.

The country has also been able to avoid mass layoffs, with separate data on Thursday showing unemployment was stable at 6.4 percent in July, the same rate as June.

Thursday's data "is a glimpse in the rearview mirror", ING bank analyst Carsten Brzeski told AFP.

"The economy already began picking up in the course of the second quarter."

The German government has gone to unprecedented lengths to cushion the economic impact from the crisis, ditching its no-new-debt dogma in favor of massive stimulus aimed at spurring investment and consumer spending.

It has also rolled out huge rescue packages to shield companies and employees, helping the likes of Lufthansa and TUI travel stay afloat and preserve thousands of jobs.

Germany's bounce-back should also get a lift from the European Union's €750 billion ($883 billion) coronavirus recovery plan.


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