ifo Institute: Shutdown Affects All Federal States to a Similar Extent

“The direct pandemic-related decline in economic output in this scenario is likely to be around 50 percent in all Länder,” says Joachim Ragnitz from the ifo Institute’s Dresden Branch. “For the year as a whole, then, German GDP would shrink by between 15.2 and 17.5 percent, depending on the length of the recovery phase.” While the impact is somewhat greater in those Länder with a high proportion of industry, such as Bavaria or Baden-Württemberg, than it is in Mecklenburg-Western Pomerania or Schleswig-Holstein, the differences are only slight (see Fig. 1). “We cannot expect to see compensatory effects like the ones that emerged in the 2009 economic crisis, because almost all sectors are currently affected by production losses,” Ragnitz explains.

Background: To determine the impact of the coronavirus crisis on specific Länder, the ifo Institute applied the calculations presented by Dorn et al. to the individual federal states. These calculations are based on a shutdown period of 2 months and a recovery phase of 1–3 months. A long version of the article has been published in ifo Schnelldienst digital, 4/2020 (German only).

A presentation of the assumptions for the calculated scenarios (German only) can be found on the ifo Website.