Brandenburg Gate in Berlin, Germany

Germany GDP Q1 2021

Germany: Economy suffers contraction in the first quarter of 2021

Germany witnessed likely one of the strongest contractions in the Euro area in the opening quarter of the year, with GDP falling 1.7% quarter-on-quarter after expanding 0.5% in Q4 2020. The print likely reflected the impact of a new wave of Covid-19 cases and associated containment measures. In annual terms, the economy shrank 3.3% in the first quarter, down from the fourth quarter’s 2.3% contraction.

Although a detailed breakdown is not yet available, the quarterly print was likely driven by the continued impact of restrictive measures on domestic demand, particularly household spending. Monthly data for January and February showed that retail sales contracted at an accelerated pace on average compared to the fourth quarter. An uptick in the unemployment rate in the same period likely also impacted private consumption. On the other hand, healthier external demand dynamics are expected to have softened the fall: Growth in merchandise exports picked up pace on average in January–February compared to the fourth quarter.

A detailed breakdown of national accounts data will be released on 25 May.

Looking at the year as a whole, the economy is forecast to return to growth, despite the initial setback in the first quarter. The rollout of vaccination programs globally should facilitate the gradual easing of restrictive measures and thereby stimulate foreign and domestic demand. However, the lockdown measures currently in place in Germany could be extended until the end of May or mid-June, which would delay the domestic recovery further. As such, the balance of risks remains skewed to the downside, with lingering uncertainty over the evolution of the pandemic and the need for continued restrictions. Moreover, questions remain around the uptake of vaccines as well as their efficacy in the face of new strains of the coronavirus.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest