Germany's economy suffered its biggest contraction last year since the 2009 financial crash but the pandemic-induced slump was limited thanks to its manufacturing strength, official data showed Thursday.

Output shrank 5.0 percent in 2020 as "almost all economic sectors were markedly affected by the corona pandemic", the federal statistics agency Destatis said.

The figure was better than the government's own forecast for a decline of 5.5 percent but the downturn still ended 10 consecutive years of growth, Destatis added.

In 2009, in the midst of a global economic crisis, gross domestic product (GDP) had plunged by 5.7 percent.

Like its neighbours, the country of 83 million people has been hit hard by a resurgence in coronavirus cases, prompting the shuttering of bars, gyms, cultural and leisure centres in November, followed by schools and non-essential shops in December.

But Germany's Economy Minister Peter Altmaier told reporters that the second shutdown had "less impact on the real economy than in the spring, which makes me optimistic that we can manage to deal with the pandemic in such a way that it does not prevent the economic recovery.

"Overall I am firmly convinced that the year's growth will be significant and noticeable," he added.

The 2020 German slump is smaller than others recorded in France, Italy or Spain, at 9.3, 9.0 and 11.1 percent respectively, according to the European Central Bank.

"Measured against the original fears after the outbreak of the pandemic, this sad result is also a success in damage limitation," said Fritzi Koehler-Geib, chief economist at the KfW public bank.

The pandemic's first wave caused Germany's worst quarterly drop in GDP on record, with output plummeting 9.8 percent in the three months to June.

But the economy recovered, expanding by 8.5 percent in the third quarter, before slowing down again following a resurgence of the virus.

Germany owes much to its robust industrial base, including the car sector and machine makers, even though manufacturing, which accounts for about a quarter of the economy, was particularly hit by pandemic restrictions, Destatis said.

Physical retail trade declined substantially as online trade boomed, the agency said, while restrictions closing hotels, restaurants and bars led to a dramatic decline in hospitality.

Second wave

Unlike during the first wave, the latest restrictions have left Germany's export-oriented factories and manufacturing businesses open, meaning they have had less impact on the economy than earlier in the year.

Industrial orders jumped 2.3 percent in November month-on-month, Destatis data showed, while manufacturing output rose 0.9 percent.

Both indicators have been rising for several months, buoyed by a recovery in demand from China where the virus has been largely contained.

"The German economy was less affected by the second round of restrictions than by the first," Destatis president Georg Thiel commented.

It means that, while "it now seems likely that GDP will decline in the first quarter of 2021," according to Andrew Kenningham at Capital Economics, "it should expand rapidly after that as the vaccination programme is rolled out."

- Economic rebound -

Looking ahead, the German government is upbeat, having forecast growth of 4.4 percent in 2021 and 2.5 percent in 2022.

But with Covid-19 deaths regularly topping 1,000 a day and vaccines still months away from being widely available, concerns are mounting.

The German Retail Association (HDE) has warned that the current shutdowns could trigger a wave of bankruptcies, leading to the disappearance of up to 50,000 stores in coming months.

In small- and medium-sized business, often considered the backbone of the German economy, more than one million jobs are at risk, according to the KfW bank.

Many firms have also complained that government financial assistance has been slow to arrive and is also less than before.

Whereas the government reimbursed affected companies for lost turnover in November and December, future compensation will only cover fixed costs such as rent and utilities.

Anxiety about virus variants which first emerged in Britain and South Africa and which some officials say are more infectious, is adding to the economic uncertainty.

Health Minister Jens Spahn told parliament on Wednesday the current shutdowns would probably be extended into February.

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