Coronavirus

Overall, gross domestic product is expected to grow by 3.3 percent in 2021 and 4.3 percent in 2022.

Just over a year ago, on January 27, 2020, the first case of SARS-CoV-2 was diagnosed in Germany. Since then, politicians have been battling with the drastic effects of the pandemic, including via the special conferences between the federal and state governments, which have become something of a regular fixture. At the most recent such meeting, which took place on February 10, 2021, it was decided to extend the lockdown and to reduce the target incidence rate from 50 to 35: only once the incidence falls below this value will there be any further easing of restrictions, particularly as regards the retail sector. The 33rd ifo and FAZ Economists Panel looks at current coronavirus policies and the outlook for Germany in a survey of 177 professors at German universities.

There is currently no sign of a wave of coronavirus-related bankruptcies in Germany. The suspension of the obligation to file for insolvency and the liquidity assistance provided by Germany’s federal and state governments have prevented it, according to the latest estimates from the ifo Institute. These are based on historical correlations between the state of the economy, corporate profits, and insolvencies. “As a result of the slump in corporate profits last year, outstanding claims should actually have been almost EUR 120 billion,” says Timo Wollmershäuser, Head of Forecasts at ifo. “Liquidity support has cut the expected level of defaults in half to about EUR 60 billion.”

Die Zukunft der Handelspolitik braucht Mut und Pragmatismus.

Die Pandemie hat gezeigt, wie anfällig die weltweiten Lieferketten für Störungen sind. Das heißt aber nicht, dass nun wieder komplett in Deutschland produziert werden muss, meinen die Ökonomin Lisandra Flach und der Ökonom Martin T. Braml.

A key feature of school closures is that there is no trained educator in the room to help. In their column Elisabeth Grewenig, Philipp Lergetporer, Katharina Werner, Ludger Woessmann, and Larissa Zierow argue that low-achieving students are particularly affected by the lack of teacher support. Based on a German time-use survey, it finds that students on average reduced daily learning time by about half during the school closures. This reduction was significantly larger for low-achieving students, who disproportionately replaced learning time with activities deemed detrimental to child development such as computer gaming rather than with more conducive activities such as reading.

The special questions of the survey in the third quarter of 2020 focused on in-house vocational training. Among other things, they addressed the situation during the coronavirus pandemic, but they also looked ahead to the 2020/2021 training year. 

The lockdown announced by the German government will significantly slow down the increase in economic output in the fourth quarter of 2020, according to rough calculations by the ifo Institute. “The measures decided on will bring the strong recovery from the summer to an abrupt end,” says Timo Wollmershäuser, Head of Forecasts at ifo. “Expenditure on ‘social consumption’ services will nosedive, which means that overall private consumer spending is unlikely to grow for the rest of the year.”

The coronavirus pandemic plunged the German economy into a severe recession. Following a recovery over the summer, growing numbers of infections give reason to fear that autumn will be difficult.

There’s no lack of money: in its fight against the coronavirus recession, the German government has launched a series of economic stimulus packages, most recently just a few days ago. One particular measure in this latest package is stoking a controversial debate: a temporary reduction in VAT. Between July 1 and December 31, 2020, the standard rate will fall from 19 percent to 16 percent and the reduced rate from 7 percent to 5 percent. This will bring tax relief to the tune of EUR 20 billion. But is this measure really a suitable way to inject strength into the economy?

The coronavirus pandemic and the measures to contain it have plunged the German economy into what is by far the deepest recession in its post-war history. Due to the low production of goods and services during the shutdown, growth rates should be strong at 6.9% and 3.8% in the third and fourth quarters. Nevertheless, economic output is expected to be 6.7% lower on average this year than in 2019. The recovery will continue next year.  GDP is expected to grow by 6.4% on average over the year.