The German economy collapses by 5 percent in the Corona year 2020

After a ten-year growth phase in the corona crisis year 2020, the German economy fell into a severe recession. The national budget has also slipped deep into the red.

Port facilities in Hamburg: The German economy has been hit hard by the Corona crisis.

Dhe gross domestic product (GDP) in Germany in 2020 was 5.0 percent lower than in the previous year, according to initial calculations by the Federal Statistical Office. After a ten-year growth phase in the corona crisis year 2020, the German economy has fallen into a deep recession, similar to the last one during the financial and economic crisis of 2008/2009. According to preliminary calculations, however, the economic slump in 2020 was overall less severe than in 2009 with minus 5.7 percent. The figures are price-adjusted, i.e. without being distorted by inflation.

The corona pandemic left clear marks in almost all economic sectors in 2020. In industry, economic output fell by 10.4 percent compared to 2019.

The economic downturn was particularly evident in the service sectors, some of which recorded more severe declines than ever before. An example of this is the combined economic sector of trade, transport and hospitality, whose economic output was 6.3 percent lower than in 2019. There were quite contrary developments: online trade increased significantly, while stationary trade was in some cases deeply in the red. The severe restrictions in accommodation and gastronomy led to a historic decline in the hospitality industry.

Bifurcation in consumption

One area that was able to assert itself in the crisis was the construction industry: the gross value added here increased by 1.4 percent compared to the previous year.

The effects of the corona pandemic were also clearly visible on the demand side. In contrast to the situation during the financial and economic crisis, when consumption as a whole supported the economy, there was a dichotomy: while private consumption expenditure in 2020 fell by 6.0 percent year-on-year and was therefore stronger than ever before, consumer spending had an impact State stabilizing with an increase of 3.4 percent, which, according to the Federal Statistical Office, contributed among other things to the procurement of protective equipment and hospital services.

According to the official figures, gross fixed capital formation recorded the sharpest decline since the financial and economic crisis of 2008/2009 at minus 3.5 percent. The corona pandemic also had a massive impact on foreign trade: exports and imports of goods and services fell in 2020 for the first time since 2009, exports by 9.9 percent and imports by 8.6 percent. The decline in services imports was particularly large, which was primarily due to the high proportion of the sharp decline in travel.

The economic output was achieved on an annual average in 2020 by 44.8 million employees based in Germany. That was 477,000 people or 1.1 percent less than in 2019. This ended the 14-year increase in employment due to the corona pandemic, which even survived the financial and economic crisis of 2008/2009. Marginally employed people and the self-employed were particularly affected, while the number of employees subject to social insurance contributions remained stable. According to the statisticians, the expanded regulations on short-time work in particular are likely to have prevented layoffs.

According to preliminary calculations, the state budgets ended 2020 with a financing deficit of 158.2 billion euros. That was the first deficit since 2011 and the second-highest deficit since German unification, only exceeded by the record deficit of 1995, in which the fiduciary debts were taken over into the state budget.

With 98.3 billion euros, the federal government had the largest share of the funding deficit, followed by the federal states with 26.1 billion euros, social security with 31.8 billion euros and the municipalities with 2.0 billion euros. In terms of nominal GDP, the government’s deficit ratio in 2020 will be 4.8 percent.