German government sees smaller economic decline this year

The buildings of the banking district are seen from above after sunset in Frankfurt, Germany, Tuesday, Aug. 25, 2020. (AP Photo/Michael Probst)
The buildings of the banking district are seen from above after sunset in Frankfurt, Germany, Tuesday, Aug. 25, 2020. (AP Photo/Michael Probst) (Copyright 2020 The Associated Press. All rights reserved)

BERLIN – The German economy, Europe's biggest, is performing better than expected following the easing of coronavirus lockdown restrictions, the government said Tuesday, as it issued a slightly more optimistic forecast for this year.

Economy Minister Peter Altmaier said he is now predicting a contraction of 5.8% in 2020, rather than the 6.3% he forecast in late April. For next year, the government is predicting 4.4% growth, down from its previous forecast of 5.2%.

“The recession in the first half of the year wasn't as big as we feared, and the upswing .... is going faster and more dynamically than we dared to hope,” Altmaier said.

He added that he hopes this year's GDP figure might turn out “slightly better” than the new forecast.

The economy shrank by 9.7% in the second quarter compared with the previous three-month period, easily the worst performance in the 50 years that quarterly GDP figures have been recorded. But that was still one of the less drastic contractions among Europe's major economies during the wide-ranging coronavirus shutdowns in the spring. France, Italy, Spain and Britain all saw double-digit drops.

Germany's finances were in solid shape before the crisis, which the government has tackled with a wide range of rescue programs and a stimulus package that includes a six-month sales tax cut.

Germany has been loosening coronavirus restrictions since late April, but a recent increase in new infections has caused concern. Officials agreed last week to hold off on any significant further easing for now.

Altmaier said he is “convinced that we can and will prevent a second overall lockdown.”