France and Germany slowly emerge from severe recessions

(Image: Wikimedia)

Severe recessions in Germany and France last year, caused by the coronavirus pandemic, began to improve slightly toward the end of 2020, as a second series of lockdowns had a milder impact on their economies, those governments reported on Friday.

But prospects for a hoped-for recovery this year in Europe’s two largest economies may be delayed as a new variant of the virus circulates and as problems emerge in the rollout of vaccines, economists warned.

The French economy shrank by 8.3 percent last year as two sets of national lockdowns, lasting months, dealt strong blows to business activity, the national statistics agency reported on Friday.

But the overall contraction was less than expected. By reducing the strictness of the nation’s second lockdown, which went into effect in October and was mainly limited to restaurants and cultural events, the government avoided a worse economic hit, the statistics agency said. Growth in the fourth quarter fell 1.3 percent compared with the same period a year earlier — far less than the 4 percent contraction forecast by many economists.

In a note to clients, the Dutch bank ING wrote, "The big question now is whether France will manage to avoid a second recession in 15 months."

"Given the current health situation, another recession looks all but certain," the bank added.

The economy in Germany grew 0.1 percent in the fourth quarter compared with the third quarter, the country’s Federal Statistical Office said. That compared to growth of 8.5 percent in the third quarter, as the economy bounced back from a severe downturn early in the year, when the pandemic brought German factories to a standstill.

Overall, the German economy shrank 5 percent for all of 2020, the statistical office said.

In a separate note to clients, ING said, "It's the worst performance since the financial crisis in 2009 but still much better than some had feared at the start of the COVID-19 crisis."

Economists predict that the German economy will shrink again in the first quarter of 2021 because of the slow rollout of vaccines and extended lockdowns.

By Liz Alderman and Jack Ewing