German economy to shrink in first quarter, economists warn

The German economy is expected to shrink by roughly 2% in the first quarter of 2021, according to the government's economic advisory council.

Following on from a similar drop for Q4 2020 owing to the increase in lockdown measures over the Christmas period and a significant shrink to German retail as a consequence of these lockdowns, Europe's largest economy is expected to take another hit owing to the effects of the coronavirus pandemic.

Read more: German retail takes hit as Merkel faces pressure to lift lockdown

The council cut its previous forecast by 0.7% down to 3.1% and has stated the economy is unlikely to return to pre-pandemic levels until at least Q4, if not after the new year.

Further issues have been caused by the slow rollout of vaccines across the European Union and Germany's suspension of the AstraZeneca vaccine is expected to continue to have consequences going into the future.

The suspension of the vaccine has been met with mixed reception from government officials, many of which consider it necessary in aiding Germany's pandemic recovery.

It is expected retail and services will continue to be hit owing to the lack of vaccinations within the general population.

The vaccine's suspension is due to links with blood clots, despite the European Medicines Agency's pleas to not stop inoculation to allow for companies to continue to deal with the crisis.

Read more: More countries opt to suspend AstraZeneca vaccine despite WHO protests

The council said in a statement: “The biggest downside risk remains the development of the coronavirus pandemic. The question of how quickly the economy can get to normal mainly hinges on the vaccination progress."

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