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German economy shrinks 1.7% amid COVID crisis

April 30, 2021

An extension to restrictions during the third wave of the coronavirus pandemic has hampered Germany's economic recovery at the start of 2021.

Empty chairs outside a closed restaurant
Experts hope the economy will start to grow again in springImage: Daniel Kubirski/picture alliance

Germany's economy shrank 1.7% in the first quarter compared to the previous three months, according to official data on Friday.

The coronavirus crisis, which has forced extended shutdowns of businesses, was behind the decline in the country's economic performance, the Destatis federal statistics agency said.

What is behind the slump?

Household consumption has been most effected by the latest round of coronavirus restrictions introduced in Germany, the statistics agency explained.

Many consumers brought forward major purchases to the end of 2020. They did so after a temporary reduction in value-added tax.

Bad weather also played a role, with Germany's booming construction sector hampered by subzero temperatures throughout winter.

Meanwhile strong demand for German goods, particularly from China and the United States, have propped up the country's economy.

Economic orthodoxy and the pandemic

The economic data in numbers

The figure, measuring gross domestic product (GDP), is lower than analysts' forecast of a 1.5% contraction for the three-month period.

The first quarter result is down by 3.3% from a year earlier when the coronavirus crisis first took hold.

Compared with the fourth quarter from 2019, before the virus spread to Germany, Friday's figure represents a 4.9% contraction.

Europe's largest economy had shown hopes of recovery after posting 0.5% growth in the final three months of last year.

Germany's performance was also worse than the first-quarter data coming out of other large European economies earlier this week.

France announced a return to growth over the January to March period at 0.4%. Italy suffered a contraction of 0.4% and Spain by 0.5%.

How are Germany's economic prospects?

However, Germany this week raised its growth prediction for 2021 .

Economy Minister Peter Altmaier said that the government now expected an increase in GDP of 3.5% this year, compared with a previous forecast of 3%.

Experts expect the economy to pick up during the second half of the year as more people are vaccinated and restrictions are eased.

But most analysts are not expecting a return to normal economic life in the nation until next year.

German business sentiment slumps on virus woes

kmm/rt (AFP, dpa)