Slowly but surely, the German economy is recovering from the great recession of 2020 caused by the Covid-19 pandemic. The gross domestic product (GDP) of the euro area’s largest economy grew by 2.7% in 2021, Destatis, the national statistics office, announced on Friday (January 14th). Nominal growth is certainly important, but no reason to rejoice: this increase in GDP remains insufficient to compensate for the drop of 4.6% recorded in 2020. In 2021, the level of national production remained 2% below that of 2019.
An international comparison is enough to understand the persistent difficulties of the world’s fourth-largest economy. Germany shows a much smaller increase in its GDP than that of its European partners. According to forecasts from the European Commission, cited by Destatis, the rebound is much greater in France (+ 6.5%), Italy (+ 6.2%) and Spain (+ 4.6%). Admittedly, these three countries suffered a steeper decline than Germany in 2020, but the latter is clearly below the European average and the euro zone (+ 5% in 2021). Above all, the contrast with the United States is painful: the American economy had declined less sharply in 2020 (- 3.4%), but its recovery in 2021 is much more vigorous (+ 5.8%).
The main cause is Germany’s high exposure to foreign trade, which makes it more sensitive than others to current supply chain disruptions. Despite full order books, the industry is failing to meet demand, due to shortages of raw materials and electronic components like chips, which have reached historically high levels.
Robust labor market
The shortage indicator calculated by the Ifo economic institute has largely exceeded the peak reached during the economic and financial crisis of 2008-2009, which pushed prices up. Industry, a key sector of the German economy, has certainly grown (+ 4.4% compared to 2020), but not enough. The bottlenecks also concerned transport problems, particularly maritime, decisive for « Made in Germany », underlines Destatis.
The sports, leisure and cultural sectors, in particular, are suffering
These effects were combined with the pandemic restriction measures imposed in 2021, which affected consumption. In the first quarter, Germany was in virtual confinement, with shops, restaurants, hairdressers and schools closed or in restricted operation. The sharp upturn in activity in spring and summer was halted by the return of infections and restrictions in the fall.
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