German economy shrinks 2.7% in 2021 as COVID 19 curbs persist

A worker at the Volkswagen assembly line in Wolfsburg, Germany, April 27, 2020. BERLIN, Jan 14, Reuters - The German economy failed to return to pre-pandemic size in 2021 as microchip shortages hit the car industry and further COVID 19 restrictions slowed down the recovery of Europe's largest economy in the last few months of the year.

The Federal Statistics Office showed on Friday that gross domestic product increased by 2.7% in 2021, after plunging 4.6% in the first coronavirus crisis year 2020.

The figures, in line with analysts' forecasts in a Reuters poll, indicate that Germany's economic output is still some 2% less than the pre-crisis 2019 level, the office said.

In the final three months of 2021, the world's fourth-biggest economy shrank as a result of resurgence of coronaviruses, the office said.

An early estimate pointed to a fourth-quarter contraction between 0.5% and 1.0% quarter-on-quarter.

The office said that there were a jump in exports and massive public spending in 2021 to cushion the impact of the Pandemic.

German start-up BioNTech 22 UAy has developed and domestic production of a groundbreaking COVID 19 vaccine. A statistics office spokesman said that DE boosted growth, but it didn't quantify the impact.

Economic institutes estimated that BioNTech alone added 0.5% to Germany's economic output last year, which would account for nearly a fifth of the overall expansion.

Sebastian Dullien, an economist at the macroeconomic policy institute IMK said, "I can't think of another single German company that has ever contributed so much to economic growth.

Germany increased net new borrowing to a record 215 billion euros $245.87 billion last year, a record amount of 130 billion euros in 2020 to fund the fight against COVID.

The deficit of the public sector in all state levels rose to 153.9 billion euro or 4.3% of economic output.

The economy ministry said in its monthly report that ongoing supply bottlenecks for important primary products in manufacturing were likely to persist for a long time.

Most economists believe that the German economy will shrink again in the first three months of 2022, leading it into another technical recession, defined as two consecutive quarters of contraction, when the economy shrank in the first two quarters of 2020.