2nd COVID-19 Wave Costs German Economy £1.5bn Per Week

The second COVID-19 wave was dampening the German economy in the 2020/2021 winter, reducing added value by 1.5 billion euros (1.8 billion dollars) per week, according to an analysis published by the ifo Institute on Wednesday.

However, the overall macroeconomic impact was “significantly lower than during the first wave in spring 2020,” said Timo Wollmershaeuser, Head of Forecasts at the ifo Institute, in a statement.

Consumer-related service sectors, such as hospitality, cultural facilities, sports and leisure facilities, as well as hairdressing and beauty treatment, would dampen German Gross Domestic Product (GDP) by around half a percentage point in the fourth quarter of 2020 and by almost one percentage point in the first quarter of 2021, according to the analysis.

Real economic output was likely to be around 20 billion euros lower in the first quarter of 2021 than in the fourth quarter of 2019, the last quarter before the outbreak of the COVID-19 pandemic in Germany.

Negative COVID-19 effects were less pronounced in the retail sector, in particular online retail, and in transport and business services in Germany, which would “mainly reflect the fact that significant parts of these sectors are benefiting from the strong industrial and construction sectors,” the analysis noted.

“Given that the manufacturing and construction sectors continue to perform well, GDP is likely to stagnate rather than decline at the beginning of the year,” said Wollmershaeuser.

Following a 5.0 per cent slump in economic output in 2020, the German government is expecting GDP to grow by 3.0 per cent this year, according to the annual economic report for 2021.