Internal hyperlinks for navigation

Article - Economic Situation and Cyclical Development

Economic Situation and Cyclical Development


The German economy is gradually emerging from its slowdown. For 2020, the Federal Government expects an annual average increase in gross domestic product of 1.1% in price-adjusted terms. Economic dynamism remained restrained at the beginning of 2020. In the course of the year, the economy is likely to pick up some slight momentum.

The coronavirus pandemic has led Germany’s economy – like the global economy – into a recession. However, the 2020 interim projection, which was published in early September by the Federal Ministry for Economic Affairs and Climate Action, shows that the worst fears have not materialised and that the economy is recovering faster than expected. The recession in Germany has already bottomed out.

Three times a year, the Federal Government submits a projection for Germany’s overall economic development under the lead responsibility of the Federal Ministry for Economic Affairs and Climate Action. The annual projection is published by the Federal Government each January as part of the Annual Economic Report. The spring and autumn projections serve as a basis for the Working Party on Tax Revenue Forecasting to estimate the tax revenues. The budgets of the Federal Government, the Länder, municipalities and social insurance funds are based on the key overall economic figures that are forecast. The information provided to the European Union in the context of the Stability and Growth Pact is also based on these projections.

The 2020 interim projection falls outside the usual series of projections. It will form the basis for the next tax revenue forecast in September, thus providing a solid foundation for the 2021 budget.

The Federal Government forecasts short-term and medium-term economic development and the production potential. These estimates serve as the basis for the calculation of the maximum annual net new borrowing in the context of the 'debt brake' under Articles 109 and 115 of the German Basic Law. You can find projections from preceding years in the Archive (in German).

Key figures of the 2020 interim projection

Gross domestic product by expenditure (price adjusted)201920202021
Year-on-year change (in per cent)
Gross domestic product [1]0,6-5,84,4
Private consumption [2]1,6-6,94,7
Public-sector consumption2,74,8-0,4
Gross fixed capital formation2,5-3,75,2
- of which equipment0,5-16,512,0
- buildings3,83,82,4
- other investment2,7-1,73,1
Changes in inventories and net acquisition of valuables (contribution to GDP growth)-0,70,00,0
Domestic demand1,2-3,63,6
Net foreign demand (contribution to GDP growth) [3]-0,6-2,30,9
Private consumption [2]1,30,51,2
Gainfully active persons (domestic)45,344,945,1
Unemployed persons (Federal Employment Agency)2,272,692,58

[1] In 2020, calendar-adjusted growth is 6.1%, the rate over the course of the year is 4.9%.
[2] Including non-profit-making organisations.
[3] Absolute change in net foreign demand in per cent of pre-year GDP (= contribution to change in GDP).

Key figures on the situation of the German economy

Symbolicon für Wachstumskurve

per cent rise in gross domestic product (GDP)
in 2020 compared with the preceding year

Symbolicon für Lastenwagen

per cent rise in exports
in 2020 compared with the preceding year

Symbolicon für Geld

per cent rise in consumer spending
in 2020 compared with the preceding year

Symbolicon für Arbeiter

thousends more people in work
in 2020 compared with the preceding year

Current situation

The Economic Situation in the Federal Republic of Germany in January 2021

Last year, the outbreak of the coronavirus pandemic sent the German economy into a severe recession not unlike the economic and financial crisis of 2008 and 2009. Over the year, gross domestic product fell by 5.0%. [1] After a strong recovery of 8.5% in the third quarter of 2020, the partial lockdown which was imposed in November and subsequently tightened and extended is likely to have caused the economy to stagnate in the last quarter of the year. Despite the partial lockdown, industrial output continued to grow in November, as did new manufacturing orders. This suggests that the industrial sector has not been as badly hit by the measures as it was last spring. Retail turnover (excluding cars) continued to grow in November, although sector-specific developments differed greatly from one another. While online and mail-order trade registered a strong increase in turnover, fixed-site retail outlets suffered particularly from measures taken in response to the pandemic. Although leading indicators in December did not take full account of the tightening of the lockdown, they already painted a gloomier picture. The number of monthly new car registrations by private households reached the mark of 135,000 (seasonally adjusted) in December, well above the monthly average for 2018 and 2019. Despite the partial lockdown, the development of the labour market was stable. Gainful activity registered only a slight decline in November. Likewise, seasonally adjusted figures for unemployment continued to decline appreciably in December. Meanwhile, registrations for short-time work in November and December point to a rise in the number of people in short-time work.


After ten years of continuous economic growth, the coronavirus pandemic caused GDP to decline by 5.0% overall in 2020. However, the decrease turned out to be not nearly as dramatic as many experts had been predicting over the course of the year. This is due to the resilience of the German economy, but also to the comprehensive packages of measures adopted by the Federal Government to support the economy and stabilise incomes. After the second quarter had recorded a historic slump of 9.8%, a remarkable process of recovery set in as restrictions were gradually lifted. In the third quarter, German economic output grew by 8.5%, reaching approximately 96% of the level posted in Q4 2019 before the outbreak of the pandemic. Although the recovery went on to lose momentum, economic output figures continued to predominantly record increases through November. The new lockdown, however, is likely to have caused GDP to stagnate in the fourth quarter.

The latest figures are indicative of a two-pronged economic development: while the services sector is once again being more heavily impacted by the restrictions on social contacts, the industrial sector continues to experience robust development. Despite the partial lockdown, new manufacturing orders and industrial output continued to grow in November, as did trade in goods. Notwithstanding the uncertainty over the conclusion of a Brexit agreement between the EU and the United Kingdom – still pending at the time of the surveys –, business and export expectations in the manufacturing sector brightened further in December. Also, the labour market has so far demonstrated considerable resilience. Employment has increased overall in recent months, with unemployment continuing to decline. The latest figures, however, point to yet another rise in short-time work.

For more information about the economic situation in January please click here.

Further information

Graph on the subject of Economic Development; Source: