As the world’s economy crumbled due to the coronavirus pandemic, it seems like Germany was not as affected. According to official figures, Germany’s economy only decreased by 5% in 2020. This number is among the smallest declines recorded in Europe despite the pandemic that caused a recession since 2008.
Germany’s Impressive Stable Economy
In Europe, it is expected that Germany won’t be affected by the recession, and analysts are now crediting a decisive fiscal response and the avoidance of optimistic forecast, helping the country to bounce back fast. Meanwhile, Italy and France’s economy dropped by 9%, while the UK recorded its worst performance in 300 years, plummeting at 11.3%.
Analysts stated that Germany’s economy’s composition helped it record a stronger performance than other European countries. Germany’s massive manufacturing and exporting base still operated last year, unlike the service-sector in the United Kingdom, which the country is heavy with.
At least a quarter of Germany’s economy is from industrial production, compared with about a tenth of the UK economy.
According to the Bank of England, in the United Kingdom, social consumption is higher than in other major economies.
The German national statistics office stated that the GDP of Germany fell only 5% in 2020. The COVID-19 pandemic effect was less severe in Germany’s economy than the 2008 to 2009 financial crisis.
Tomas Dvorak, an economist at the consultancy Oxford Economics, stated that the UK was hard hit during the pandemic’s first wave. The late lockdown necessitated tougher restrictions that remained in place for longer than other countries, causing a more severe downturn.
The United Kingdom’s GDP fell by 19% in the second quarter of 2020, which is among the worst record in the developed world.
Comparing the UK and Germany, Dvorak said that Germany has also been more decisive with its fiscal response, even if the size of the stimulus was not massive. They avoided some factors like giving deadlines for withdrawal of the scheme.
The emergency response of Germany to the crisis, offering tax cuts and releasing billions of Euros in additional spending into the largest economy in Europe, which consisted 4.3% of its €3.3tn (£2.9tn) economy, according to Andrew Kenningham, the chief Europe economist at the consultancy Capital Economics.
Compare this with the support worth 12.4% of the United Kingdom’s £2.2 trillion economies.
Under the German system of wage subsidies to protect the workers’ jobs, similar to the UK furlough scheme, the peak number of people accessing the support was the equivalent of 12.6% of the labor force, and this is compared with 26% in the United Kingdom.
The German statistics office stated that Germany’s economic growth stagnated in the final three months of 2020, a period of rising COVID-19 cases when several other massive European economies are expected to decrease into a double-dip recession in the United Kingdom.
When adjusted for a shorter number of working days in 2020 than in 2019, Germany’s GDP fell by 5.3% as the COVID-19 pandemic brought disruption to the economy with falls in industrial production and household spending.