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Strong Contraction of the German Economy Due to Lockdowns

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The German economy is likely to contract sharply in the first quarter of this year. This is mainly because the service sector, including catering and tourism, continues to be affected by strict corona measures.

 

In addition, there is also a slowdown in the construction sector of the largest economy in Europe, according to the Bundesbank.

The Bundesbank was previously more optimistic about the economic recovery when the number of coronavirus infections fell, and vaccines were distributed. In its monthly report, the German central bank is now more gloomy. Comments about the vaccination campaign were also omitted. Inoculating people against corona is being delayed due to delivery problems and reports of possible side effects of vaccines.

“The measures to contain the pandemic are on average stricter in the current quarter than in the previous quarter,” said the Bundesbank. “Therefore, economic output is likely to fall sharply in the first quarter of 2021.” The central bank added that an increase in sales tax, which was temporarily lowered last year, has helped reduce construction in the first month of the year.

Industrial production also declined in the first month of the year. On the other hand, the number of new orders has been strong and that exports of goods have increased, according to the Bundesbank.

The export of goods to Great Britain was an exception. In January there was a decrease of a quarter on an annual basis. The British left the internal market of the European Union on 1 January.

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