Germany’s leading economic researchers expect the economy to collapse by 9.8 percent this quarter. They expect the recovery in 2021 to become clear. But everything depends on the corona germ.
The crash is there – but what’s next?
Timo Wollmershauser does not talk much about the decisive limitation. “What makes us so optimistic,” says the economic expert at the Munich Ifo Institute, “are the assumptions we have made.” For example, the assumption that “the epidemic will be overcome next year”. Or that the entire global economy can then start up again quickly. That no structures break down in the meantime. And if all of this happens, at least that’s what the leading economic institutes see in their joint forecast, then a 4.2 percent drop in economic output this year could be followed by an even stronger recovery of 5.8 percent the next. At the end of 2021, the economy could land on the pre-Corona path again. If.
These restrictions hover over the whole report like a big question mark. “There are significant downside risks associated with this forecast,” it says. For example, the pandemic could slow down much more slowly, or the economy could not start up as well as expected. Economists simply lack experience with such a crisis.
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What is already emerging, however, is the extent of the crash. In the second quarter, the institutes expect a drop of 9.8 percent, the strongest since the quarterly recording of performance data began. There is also still much to be said for the v-shaped course of the crisis, as the Council of Experts had assumed – with a sharp crash, but an equally sharp recovery. “The good thing about this crisis is that it is largely synchronized,” says Wollmershauser. Just as the entire global economy is currently standing still, it can pick up everywhere at almost the same time. The crucial question is just when this happens.
“We have one moving target to do, “says the Minister of Economy
But the institutes also see Germany well equipped for the transition. The number of unemployed rose by almost a quarter of a million to 2.5 million. At the same time, however, 2.4 million employees overwintered in short-time work. The country also benefits from quite well-filled coffers. “We see that consolidation policy is also worthwhile in the long run,” says Stefan Kooths from the Kiel Institute for the World Economy. “It will not be the last crisis that will make us economically difficult.” And the Federal Minister of Economics Peter Altmaier (CDU) sees himself confirmed by the researchers’ judgment. “The numbers show us very clearly that our measures against the economic consequences of the pandemic are starting to work,” he says. The federal government wants to present a forecast itself at the end of April. Then it should also be clearer how deeply the shutdown affects the economy. “We have one moving target to do, “says Altmaier, a moving target.
But the institutes warn of one thing: impatience. From an economic perspective, too, it is most important to get the spread of the virus under control, says Oliver HoltemOller from the Halle Institute for Economic Research. “If we do not succeed, all considerations regarding the medium-term development of the economy are obsolete.”
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