The German economy shrank in 2009 for the first time in six years. With –5.0%, the decline in the real or price-adjusted gross domestic product (GDP) was larger than ever since World War II according to the first estimates Destatis, the German federal statistics, published today.

Destatis said the economic slump occurred mainly in the winter half-year of 2008/2009 - - that was the period after the collapse of US investment bank Lehman Brothers, In September 2008.

Over the year, Destatis said there were signs that the economic development would slightly stabilise on the new, lower level. In 2008 the GDP had risen by 1.3%; in 2007 by 2.5% and in 2006 by 3.2%.

The statistics office said what was striking in 2009 is that both exports and capital investment in machinery and equipment slumped sharply.

Foreign trade, which in previous years had been a major driving force for growth in the German economy, slowed down economic development in 2009. While exports were down a real/price-adjusted 14.7%, the decrease was just 8.9% for imports. Hence the balance of exports and imports made a negative contribution to GDP growth, as it had done in 2008.

However, at –3.4 percentage points, it was markedly larger in 2009 than in 2008 (–0.3 percentage points). Gross fixed capital investment in machinery and equipment was down by one fifth compared with 2008 (–20.0%). Gross fixed capital formation in construction decreased by just 0.7% on the previous year.

The only positive contribution in 2009 was made by final consumption expenditure: Final consumption expenditure of households was up a price-adjusted 0.4%, government final consumption expenditure rose by 2.7% on the previous year.

Destatis said the economic performance was in 2009 on average achieved by 40.2 million persons in employment whose place of employment was in Germany, which was 37,000 persons or 0.1% less than a year earlier.

According to provisional calculations, general government net borrowing amounted to €77.2 billion in 2009. As a ratio of GDP at current prices, the deficit was 3.2%. Following a balanced budget in 2008, the reference value of 3% of the GDP laid down in the Maastricht Treaty/Euro Growth and Stability Pact was exceeded in 2009 for the first time in four years.
 
In mid-December 2009, the Ifo Institute for Economic Research at the University of Munich forecast German growth this year of 1.7% and by 1.2% on average for 2011.

Ifo said:"In the forecast period, the road signals of economic activity in Germany remain on yellow, and a green phase is still not expected. To be sure, the endogenous propellant forces are gradually becoming a little stronger again, but the funds made available by the economic stimulus packages are gradually running dry. In addition, the credit constraints for new investments and jobs remain strong. The state of the German economy is thus labile, and a self-sustaining recovery is not evident."