The German economy will probably shrink this year by the biggest margin since the federal republic was founded 60 years ago as the global crisis strips companies of orders from cars to chemicals, a government report showed.
Europe's biggest economy may contract by as much as 2.25 per cent in 2009, only showing the first signs of recovery in the second half of the year, according to an annual report by the Economy Ministry.
The German economy's biggest previous contraction was in 1975, when it shrank 0.9 per cent following the 1973 global oil crisis.
"This is the biggest drop in economic performance in Germany's postwar history," Economy Minister Michael Glos told reporters in Berlin today.
"And the main reason is the decline in exports." The report will form the basis of government tax- revenue forecasts and influence policy aimed at curbing the impact of the global crisis.
The projected decline adds evidence of the susceptibility of Germany's export-based economy in the global crisis.
Exports that grew almost 4 per cent last year will likely decline by 9 per cent in comparison in 2009, the report said. Every third euro earned in the economy in 2007, equal to some 38 per cent of gross domestic product, is paid by importers of German goods, according to the ministry.
"A downside of export dependency is having to sit out the recession of your global customers," Andreas Rees, chief German economist at UniCredit Markets & Investment Banking in Munich, said today in a telephone interview.
"I don't see any light in the tunnel before the second half of the year." Chemical producer BASF SE and carmaker Volkswagen AG are among companies that have suspended production, cancelled shifts and shortened working hours in recent weeks. German car sales fell last year to the lowest level since reunification in 1990.
Germany's benchmark DAX share index has lost almost 10 per cent this year after dropping 40 per cent in 2008. Business confidence dropped to the lowest in more than a quarter of a century in December.
Bloomberg