Germany’s economy contracted by 5% during 2020, less than the 5.7% contraction recorded during the global financial crisis, as massive government stimulus measures helped reduce the impact of the COVID-19 pandemic.
Even before the pandemic, Europe’s largest economy was already slowing: GDP growth was just 0.6% in 2019, a sharp slowdown from an average annual growth of 2% in 2014-18 amid slowing growth in the domestic auto industry and weak goods exports due to rising global trade tensions.
The European Commission expects Germany’s economy to grow 3.2% this year and another 3.1% in 2022.
According to Destatis, Germany’s budget deficit in 2020 was about €189.2 billion, the first deficit since 2013 and the highest level since reunification in 1991. As a percentage of GDP, the deficit was equivalent to 4.2 percent. According to Eurostat, public debt rose to 69.8% of GDP in 2020, up sharply from 59.7% of GDP in 2019 and the highest level since 2015.
The seasonally adjusted unemployment rate was 4.5% in February, up from 3.6% a year earlier. According to Destatis, German inflation rose to 1.7% in March 2021, the highest since February 2020, as the temporary reduction in VAT rates has finally ended. According to the European Commission, inflation is expected to accelerate to 2.3% this year from 0.4% in 2020.
The economic situation continues to affect the growth of residential property values in Germany and its declining yields.