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Germany: Gross domestic product up 2.7% in 2021

Christian Fernsby |
According to first calculations of the Federal Statistical Office (Destatis), the price adjusted gross domestic product (GDP) was 2.7% higher in 2021 than in 2020 (also calendar adjusted).

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Topics: GERMANY   

“The economic development was highly dependent on Covid-19 infection rates and the associated preventive measures also in 2021,“ said Dr. Georg Thiel, President of the Federal Statistical Office, at the press conference on the gross domestic product 2021 in Wiesbaden.

“Despite the continuing pandemic situation, more delivery bottlenecks and material shortages, the German economy managed to recover from the sharp fall last year although the economic performance has not yet reached its pre-crisis level again,“ Thiel continued. GDP was still 2.0% lower in 2021 than in 2019, the year before the Covid-19 crisis began.

In contrast with the preceding crisis year of 2020 when production was in part reduced sharply on account of the Covid-19 pandemic, economic performance increased in nearly all economic sectors in 2021.

The price-adjusted gross value added in manufacturing rose markedly by 4.4% year on year. Notable increases were recorded also for most of the service sector compared with 2020. The economic performance in the field of business services, which include research and development as well as legal, tax consultancy and engineering activities, was up by 5.4%.

At 3.0%, economic growth was somewhat lower in the aggregated economic sector of trade, transport, accommodation and food services due to the continuing pandemic restrictions.

Compared with 2020, the economic performance was down slightly only in construction (-0.4%), which had not been visibly affected by the Covid-19 pandemic in 2020.

Despite the increases of 2021, economic performance has not yet reached pre-crisis levels in most economic sectors. Economic performance in manufacturing, for instance, was still 6.0% below the level of 2019 in 2021.

Other services, which include creative activities in addition to sports, culture and entertainment, were hit particularly hard by the continuing Covid-19 pandemic. Here the price-adjusted value added was even 9.9% below the pre-crisis level in 2021.

The decline in economic performance recorded in the crisis year of 2020 for public services, education, health was almost compensated for in 2021. Construction as well as information and communication were able to sustain their positions during the pandemic and considerably increase their economic performance compared with 2019.

In 2021, price-adjusted household final consumption expenditure stabilised on the low level of 2020 and is still far from its pre-crisis level. Government final consumption expenditure continued to support the growth of the German economy in 2021.

Although it had already been on a high level in 2020, government final consumption expenditure rose by a price-adjusted 3.4% in the second year of the Covid-19 pandemic.

The government spent more money, in particular, on the free rapid antigen tests that were introduced in all of Germany in the spring of 2021, on Covid-19 vaccines and on the operation of testing and vaccination centres.

Gross fixed capital formation in construction grew by only 0.5% in 2021 due to labour and material shortages after having risen more strongly for five consecutive years. Gross fixed capital formation in machinery and equipment increased a price-adjusted 3.2% in 2021 but had in fact decreased sharply in the crisis year of 2020.

In 2021, foreign trade recovered from the strong decreases of the previous year. German exports of goods and services were up a price-adjusted 9.4% on 2020. Imports increased by a price-adjusted 8.6% in the same period. In 2021, Germany’s trade with foreign countries was thus only slightly below the level of 2019.

On an annual average in 2021, the economic performance was achieved by 44.9 million persons in employment whose place of employment was in Germany. This is roughly the same number of persons in employment as in the previous year. However, many of them worked in other economic sectors or jobs.

Employment gains were recorded for public services, education, health (+2.2%), information and communication (+2.4%) and construction (+1.2%).

In contrast, employment losses were observed for trade, transport, accommodation and food services as in the year before (-1.8%). The number of marginally employed people and self-employed continued to fall, while more persons in employment were subject to social insurance contributions.

General government budgets recorded a financial deficit (net borrowing) of 153.9 billion euros at the end of 2021, according to provisional calculations. That was even slightly more than in 2020 (145.2 billion euros) and the second highest deficit since German reunification.

The central government deficit rose substantially to 155.3 billion euros in 2021, which was even slightly more than the deficit of general government as a whole.

The financial deficits of state government (-1.6 billion euros) and social security funds (-0.1 billion euros) were small. Local government even recorded a small surplus of 3.1 billion euros at the end of the financial year. Measured as a percentage of nominal GDP, this was a 4.3% deficit ratio of general government for 2021.

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