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The Corona crisis affects national economies around the globe leading to reduced economic output across most sectors and industries.

In the second quarter of 2020 the Gross Domestic Product (GDP) fell by 10.1% as compared to the first quarter of the year – adjusted for price, seasonal and calendar effects (after -2% in Q1 2020). This development represents the sharpest decline since the beginning of the quarterly GDP calculations for Germany in 1970.

We expect the German economy to decrease by around 7% in 2020 followed by a strong rebound in 2021 with growth rates of around 5% yoy.

Infographic Foreign Trade

Germany is considered one of the most international economies globally. Around 50% of annual GDP are being exported to other countries. China led the world in exports in 2019 (2.5 trillion US dollars). China was followed by the United States, with exports valued at 1.6 trillion US dollars, and Germany, with exports valued at 1.5 trillion US dollars.

Due to the current global developments, German exports and imports decreased over the past months. In June 2020, with 91.6 billion euros exports declined by 9.4 % compared to the previous year. Imports totaled 80.5 billion euros, a decline of 10.0% compared to June 2019.

The economic effects of the pandemic abroad has a direct and significant impact on the export-oriented economic sectors. Global demand for German industrial exports fell sharply. In addition, disruptions to global supply chains put a strain on businesses.

The Corona pandemic has plunged the global economy into a recession. Due to national shutdowns, the German economic output fell noticeably during the 1st and the 2nd quarter of the year.

Germany's GDP contracted by 10.1 % in the second quarter of 2020, marking the sharpest decline since Germany began compiling quarterly growth data in 1970. Household spending, business investment and exports all fell during the second quarter. The new data confirms the devastating effect of the COVID-19 for the German economy. Due to the lockdown measures and introduced stimulus measures by the German government in recent weeks, third-quarter data are expected to be more optimistic. Still, exports may take longer than domestic consumption to recover due to the ongoing disruptions in global supply chains, as well as the grim economic situation among most of Germany’s trading partners.

The speed at which restrictive measures can be relaxed and economic activity restarted in the coming months will depend on the extent to which the virus can be contained. This outlook is thus fraught with a lot of uncertainty.

Infographic Real GDP Growth Expectation
Infographic Unemployment Rate

Rises in unemployment in Germany and elsewhere in Europe have been moderate by international standards because employers are making heavy use of short-time work programs that allows them to keep employees on the payroll while they await better times. In Germany, the unemployment rate will continue to rise in the coming months and will only start to decline in the course of 2021.

The decline in oil prices in spring is depressing the inflation rate of the consumer price index (CPI) in the course of 2020. In the second half of 2020, furthermore, the temporary cut in VAT is likely to dampen inflationary pressures, before inflation is expected to pick up again next year.

The inflation rate in Germany, measured as the year-on-year change in the consumer price index, was 0.9% in June 2020 and is expected to decrease to -0.1% in July 2020. The inflation rate is influenced, among other factors, by the reduction in value added tax active by 1 July 2020.

Infographic Inflation Rate