The German central bank said in its monthly report on Monday that the country’s economic recovery has been “interrupted for the time being,” because of the resurgent coronavirus pandemic after a strong rebound in summer.
Despite growth, overall economic performance in the third quarter was still 4% below the pre-crisis level of the fourth quarter of 2019, the Bundesbank wrote in the report, adding that it is not expected to be able to keep playing catch-up in the final quarter.
“The main reasons for this are the recent resurgence of the pandemic in this country and in neighbouring European countries, as well as the additional containment measures that have now been decided on for November,” the bank experts said.
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However, since coronavirus restrictions are not as tough as in March and April — when non-essential shops and businesses were shut down — the central bank does not expect the economic slump to be as bad.
The German government is set to spend €10bn (£9bn, $12bn) to compensate businesses that have to shut this month, covering up to 75% of their normal November revenue based on 2019. However, business owners and a number of politicians have warned that it will not be enough.
The German economy shrank by a record 9.8% in the second quarter, but emerged stronger in the third, with growth of 8.2%.
Germany is currently in a month-long partial lockdown to try and get surging COVID-19 cases under control. This means restaurants, bars, and entertainment and sports locations are closed, but shops, offices, and schools remain open. Chancellor Angela Merkel meets with state leaders today to discuss additional restrictions, and there is a chance they will be extending into December,
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The Bundesbank said that private consumption is likely to have picked up strongly in summer, also because people had more savings after being under lockdown. The central bank believes that the real challenge looking ahead is to balance the need to stop the spread of the pandemic while restricting the economy as little as possible.
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