CORONAVIRUS has helped plunge Germany into a recession, following the collapse of the economies of Italy, France and Spain.

The German economy shrank by 2.2 per cent in the first quarter of 2020, according to the federal statistics agency Destatis, making it the steepest quarterly contraction in more than a decade.

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Destatis claimed it was the worst quarter-on-quarter decline in the country’s history since the global financial crisis in 2009.

During that crisis Germany’s economy contracted by 4.7 per cent.

The figures mean Europe’s biggest economy is now in an official recession after its gross domestic product (GDP) shrank by 0.1 per cent in the last quarter of 2019.

A recession is defined as two consecutive quarters of economic contraction.

The bleak economic figures follow on from data released by both France and Italy showing they were also in a recession.

French GDP fell by 5.8 per cent in the first quarter of this year, while Italy's dropped 4.7 per cent.

Economists are also predicting the worst is yet to come as the full effects of the coronavirus restrictions are felt throughout the continent.

Economy Minister Peter Altmaier last month warned that Germany was headed for “the worst recession” in its post-war history as the pandemic caused large areas of the economy to a standstill.

“Private consumption, exports and investments in equipment shrank considerably as a result,” the German economy ministry said in a statement.

Two weeks of lockdown as well as supply chain disruptions… brought the German economy to its knees

In order to try to curb the spread of the disease, Germany, along with most other European countries imposed strict regulations, shops as well as schools and restaurants to close.

Germany started shutting down in mid-March.

Its lockdown was less severe than those imposed in Italy, Spain and France and it never ordered factories closed, but companies did largely stop production in some areas — such as the automaking sector — and supply chains were disrupted.

ING-Diba economist Carsten Brzeski said: “Two weeks of lockdown as well as supply chain disruptions… brought the German economy to its knees.

“For the time being, things will get worse before they get better.”

Allianz economist Katharina Utermoehl said in a research note: “In the short term, some catch-up effects can be expected, but the economy’s underlying growth momentum is likely to pick up only gradually in the coming months.”

Some economists are expecting the German economy to shrink by a massive 10 per cent in the second quarter, between April and June.

For all of this year the German government is predicting its GDP will contract by a record 6.3 per cent, more than during the global financial crisis.

In the short term, some catch-up effects can be expected, but the economy’s underlying growth momentum is likely to pick up only gradually in the coming months

Experts do see some light at the end of the tunnel with predictions saying the economy will be strong enough to bounce back in 2021 and recover some lost ground by growing by 5.2 per cent as the impact of the virus reduces and businesses return to normal.

The country has already started to ease some of the restrictions imposed, permitting most shops to reopen in early May.

German businesses have been supported by Chancellor Angela Merkel’s economic policies which ditched a long-standing aim of managing a balanced budget and putting forward a package of fiscal measures to the tune of €1.1trillion (£974million) that includes state-backed loan guarantees, cash injections and schemes to put workers on reduced hours to avoid layoffs.

A number of well-known brands such as Adidas and TUI have already benefitted from huge loans.

Brzeski said: “The timing of the lifting of the lockdown measures as well as the huge fiscal support by the German government… support the view that the German economy could leave the crisis earlier and stronger than most other countries.”

The future though is far from certain with Volkswagen saying on Wednesday it would suspend production again on some lines that had only just reopened because the demand for new cars was just not there.

Data already released have shown that the 19-nation eurozone's economy shrank by a record 3.8 per cent in the first quarter as business activity was frozen.

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