2021.01.2711:00:00UTC+00German Economy To Shrink In Q1: DIW Institute

The German economy is set to contract in the first quarter due to strict restrictions related to Covid-19 pandemic, the DIW Institute said Wednesday. Gross domestic product will contract 3 percent in the first quarter of 2021 after stagnation in the fourth quarter, the think tank estimated.

The hard lockdown will last until the end of February and then gradually be lifted, Claus Michelsen, an economic director at DIW Institute said. So there is a long and rocky road ahead for the German economy.

The sentiment has recently deteriorated noticeably in the automotive industry, Simon Junker, an expert at DIW institute noted. The recent lockdown has further worsened the performance of many companies, which increases the risk of a wave of bankruptcies, at least in the sectors particularly affected.

Destatis is slated to issue the fourth quarter GDP data on January 29. According to official data, the largest euro area economy contracted in the whole year of 2020 by 5 percent, the most since 2008-2009 financial crisis.