Germany has the biggest economy in the European Union and one of the biggest in the world. As can be seen from the information stated above once more underlines the strength of the local economy. However, the coronavirus pandemic created problems for the country.
However, Germany’s decision to tighten a second coronavirus lockdown increased the risk of another recession in Europe’s largest economy. Two days ago, Chancellor Angela Markel and state leaders decided to shut most stores from Wednesday until at least January 10. This way the government wants to contain the spread of the virus.
As a reminder, the German economy suffered its worst recession on record as the first wave of coronavirus infections reduced gross domestic product (GDP) by 1.7% in the first quarter. Moreover, in the second quarter, the GDP contracted by 9.8%.
Hopefully, the economy grew by 8.5% in the third quarter, thanks to higher consumer spending as well as booming exports.
Peter Altmaier who serves as the Economy Minister hopes that the country would be able to avoid another recession despite this decision.
Economy and risk factors
However, the situation is quite complicated. Economists from leading banks all agreed that this scenario was highly unlikely. Moreover, the stricter lockdown was pushing the situation towards a second, or ‘double dip’, recession.
Importantly, as part of the stricter rules, essential shops such as supermarkets and pharmacies, as well as banks can remain open from December 16.
Importantly, Commerzbank now expects the country’s economy to shrink by at least 1% on the quarter in the final three months of 2020. Moreover, the bank expects the economy to shrink by a further 0.5% in the first three months of 2021.
As stated above, Germany has one of the largest economies in the world. However, even for an economic powerhouse, it is not easy to cope with challenges. However, the country has the potential to solve most of the problems in the future.
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