The German economy suffered its worst contraction since the 2008 global financial crisis, shrinking by 2.2 percent in the January-March period from the previous quarter as the shutdown of activity to halt the spread of the coronavirus pummeled growth. Those figures, combined with a revision downward to the economic growth tally for the end of 2019, mean that Germany has entered a recession.
The German government, which reported the data on Friday, said the biggest hit came in March and will probably be worse in April, when consumer spending, capital investment and exports — a major driver of growth in Germany — fell off a cliff.
“Things will get worse before they get better,” Carsten Brzeski, the chief eurozone economist at ING, said in a note to clients.
While the worst of the pandemic is beginning to ease, with Germany and other countries slowly easing their lockdowns, Germany’s contraction was a reminder that even if the virus dissipates, the economic fallout could put pressure on the European and global economy for months or years. Germany is not only Europe’s largest economy, it is one of the most dynamic in the world.
The European Commission has projected that the European Union economy will shrink by 7.4 percent this year, the worst recession in its history.
Germany and its neighbors are spending hundreds of billions of euros in fiscal measures to stem the damage, and economists say more stimulus will be needed. Still, the huge fiscal support that Germany has provided to businesses and individuals, equal to around 30 percent of gross domestic product, could allow it to exit the economic crisis “earlier and stronger than most other countries,” Mr. Brzeski wrote.
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