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Coronavirus crisis could lead Germany into recession

Coronavirus crisis could see Germany tipped into recession. Europe’s largest economy has been affected badly by the lockdown of nearly 60 million people in Hubei province and strict quarantine measures for other parts of mainland China.

Germany’s exports to China, the country’s biggest trading partner, fell by 6.5 percent year on year in January. Germany exports; vehicles, machinery, chemical goods, electronic products, electrical equipment, pharmaceuticals, transport equipment, basic metals, food products, and rubber and plastics. However, the Federal Statistics Office said the decrease could not yet be linked to the coronavirus, as the looming impact of the outbreak threatens to edge Germany over the line into recession territory

German manufacturers depend on both demand and supply chains from China, Germany’s biggest trading partner. Economists expect the virus fallout to show up in data from February and push the economy into contraction in the first quarter.

Chancellor Angela Merkel will have to face up to the fact that the impact of the crisis is expected to show up in data from February and push the economy into contraction in the first quarter.  

German industry had already contracted for six quarters in a row before the outbreak of the coronavirus early this year.  

Global trade conflicts and last year’s Brexit uncertainty were put as contributory factors.  

Commerzbank economist Ralph Solveen warned negative growth could be on the cards for the first quarter.  

“There are growing signs that the service sector, which has so far stabilised the economy, is also suffering more and more,” said Commerzbank economist Ralph Solveen. “That is why we expect the German economy to contract slightly in the first quarter.”

The economy stagnated in the final three months of 2019.

Economists usually define a recession as a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.