Germany going through recession, likely to last until mid-year: Govt

Germany’s economy ministry announced that the country plunged into recession in March and is expected to last until the middle of the year due to the coronavirus pandemic. The Federal Ministry for Economic Affairs and Energy said in its report on economic development that several factors including the collapse of global demand, interruption in supply chains, changes in consumer behaviour, and uncertainty among investors are having a massive impact on the economy.

According to the ministry, economic performance has slumped in the first quarter and the trend is likely to continue in April. The government expects the economic recovery in the second half of the year after the COVID-19 restrictions are eased. The ministry noted that production and sales in the industry had recovered at the beginning of the year but a “massive demand and supply shocks from home and abroad caused by the corona pandemic”, reversed the economic trend.

The ministry said that the severity of the economic downturn is currently difficult to assess but a joint diagnosis of the economic research institutes anticipates a decline in the price-adjusted gross domestic product (GDP) of 1.9% and 9.8% in the first and second quarters respectively compared to the previous quarter.

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The harsh indicators for the manufacturing industry that have been available refer to a period when the corona pandemic in this country was just beginning, said the ministry. It added that the development of incoming orders, production and sales in the industry showed an upward trend and indicated an economic turnaround after the two-year weak phase of the industry.

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Merkel on budget balance

Last month, German Chancellor Angela Merkel had said that budget balance is not the government’s primary concern right now adding that the first task is to save people’s lives. She had said that Germany is open to scrapping the self-imposed zero-deficit rule to fight against the novel coronavirus outbreak. She did not rule out the suspension of the zero-deficit rule targeted at fiscal prudence and said that the administration will prioritise the virus crisis.

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(Image source: AP)