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German economy dropped 5 percent in 2009: estimate

January 13, 2010 | AFP

The German economy contracted by five percent last year, its deepest recession since World War II, provisional figures released on Wednesday by the national statistics service showed.

Europe's biggest economy grew in 2008 by 1.3 percent, and the central bank estimated last month that it should grow again by 1.6 percent in 2010.

The government also posted a public deficit of 3.2 percent last year after managing to balance its accounts in 2008, the Destatis service said.

For 2011, the Bundesbank has forecast weaker growth of 1.2 percent.

"The outlook for the German economy has gotten noticeably brighter in recent months," the central bank said on December 4.

After slumping sharply in the first three months of 2009, economic activity rebounded in the second quarter, thanks in large part to government stimulus measures.

Analysts at Germany's biggest private, Deutsche Bank, expect even stronger growth of 2.1 percent and 1.4 percent respectively in 2010 and 2011.

The country's export-orientated economy took a hit from the global economic slowdown but is set to benefit from renewed emerging market demand for capital goods such as machine tools and chemicals used to produce finished products.

The German government has also approved a fiscal stimulus package worth up to 21 billion euros (30 billion dollars) in 2010, including 18 billion euros in tax relief for private households that should underpin consumer spending.

Unemployment in Germany has been limited meanwhile by the country's short-time work scheme under which the state subsidises shorter hours for workers to avoid widespread layoffs.

Various measures contained in the plan are due to run until mid 2012 at the latest.

The number of jobless is nonetheless expected to reach more than 3.8 million people this year, and 4.2 million in 2011.

It averaged 3.42 million, or 8.2 percent of the workforce, in 2009.

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