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The World Health Organization (WHO) warns of an increase in deaths from corona in Europe in October and November. At the moment these are still relatively stable. The economic research institute (Wifo) is sticking to its economic assessment for now: the national economy is likely to contract 6.8 percent in 2020. A second wave of infections comes at a price, but not an additional lockdown.
This would plunge Austria into an even deeper recession than economic researchers have predicted to date. To do this, a stagnation of the economy in one of the most important supplier countries or export markets such as Germany or Italy was enough. “Our export economy would also have serious problems, even if we did not have a lockdown,” said Wifo economic expert Josef Baumgartner in an interview with THAN.
In June, the Wifo had expected a decrease in gross domestic product (GDP) of 7 percent for the current year as a whole, then in August with a very slight decrease to minus 6.8 percent, “which tends to be an indication that the current developments in the summer months were a bit more favorable than we had estimated in late May or early June, “Baumgartner said. “In principle, this image is still valid.”
The big question is, of course, how the epidemiological situation will develop. In some countries there has been an important expansion, for example in Spain ”, points out the economic researcher. If this becomes an international trend, it will also have an impact on economic development. “In our ‘baseline scenario,’ we assume that there will be an increase in the number of infections,” Baumgartner explained. In view of the start of school and the return of vacationers, an increase in the number of cases was already expected for the fall. In early October, economic researchers from Wifo and the Institute for Advanced Studies (IHS) will present their updated economic forecasts.
“This way we would have a second wave”
The more you test, the more positive results are found. But even after adjusting for increased corona tests, there is already an increase in the number of infections. “This way we would have a second wave.” From the beginning of March to the middle of April there was a sharp increase, then the numbers fell continuously. But over the course of the summer “with the return of vacation areas, more neglect and more private parties” infections rose again. “What has not increased is the number of hospitalizations and deaths,” emphasized the Wifo expert. The former even “rose significantly less than in March.” “You have learned to deal with the epidemic a bit.”
Mask requirement: “This does not stimulate shopping pleasure”
“What we do not expect in our basic scenario is that there will be another lockdown, that there will be certain economic obstacles, that is,” Baumgartner explained. Expanding demand for masks from the grocery store to all stores “will have an impact on consumption” from the beginning of this week. “This does not stimulate the joy of shopping.” And, in his opinion, the increasing number of cases will also reduce “the urge to go to the gastroenterologist.”
“In general, uncertainty is increasing again and this is holding back the willingness to spend in the area of trade and non-essential goods,” said the economic researcher.
Compared to other crises, Austrians’ consumer behavior changed completely in the crown crisis. In the past, consumption was a stable figure: households tried to reduce their savings and restrict their consumption spending less. This year is different: “It is very noticeable that the willingness to consume has generally decreased,” said Baumgartner. In the lockdown phase that was officially ordered in the spring of this year, consumption was still prevented, but even after the extensive lifting of restrictions, “it did not start again to this extent.” Overall, consumption has even “declined significantly more than family disposable income” in light of part-time work and unemployment, the economist said with a view to a net replacement rate of 70 to 90 percent for part-time work. reduced and 55 percent for unemployment.
The fashion trade “plummeted dramatically”
In a typical crisis situation, savings would dissolve. “This time, however, the savings rate has increased significantly: households are just cautious, they still don’t make some expenses.” For example, the fashion trade “collapsed very dramatically.” Sales losses in the bull run have so far not been absorbed by “due to reluctance to spend.” In general, there is great uncertainty. “What is not absolutely necessary was postponed or not done at all,” Baumgartner said, referring to, among other things, buying furniture and cars.
Foreign tourists are “actually completely absent”
Savings were also made on vacations. Austrians stayed in their own country significantly longer this summer, but spent less overall. At the same time, foreign guests remained largely absent, especially in urban tourism: in Vienna and Salzburg, foreign tourists were “actually completely absent”.
According to economic researchers, the restaurant and hospitality industry is likely to remain about 35 percent below last year’s figures this year. In the special areas of late-night gastronomy, which is still dead, and urban hotels, which suffer from extremely low occupancy (in Vienna it is around 20 percent), the situation is of course much bleaker.
“That will probably show some effects on unemployment figures in the coming weeks and months,” Baumgartner hopes. “Some companies have already announced that they do not expect any recovery in the fall and that therefore many employees will leave after the current phase of reduced work has expired and that they will close their operations at least for a short period.” On Tuesday, for example, Sacher hotels announced that they would separate from 140 employees and send the rest of the workforce to part-time jobs.
