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DIW Chairman Marcel Fratzscher warns that a second recession could be looming in 2021. He is much more pessimistic about the New Year than many others. Too much could go wrong.
The president of the German Institute for Economic Research (DIW), Marcel Fratzscher, warns of too high expectations for economic development this year. “Many economic forecasts are currently characterized by the illusion of a rapid end to the pandemic and an immediate economic recovery in 2021,” Fratzscher wrote in a guest article published on Friday for the Berlin “Tagesspiegel”. “This should turn out to be an illusion.”
Too much could go wrong over the next year, Fratzscher warned. “Recovery would then be more difficult and take longer than many can imagine.” The German economy is contracting in the fourth quarter and “could very well do so in the first quarter of 2021, so the economy is likely to slide into a second recession.”
Fratzscher: Bankruptcies could increase significantly
“So 2021 could be the year of disappointment, at least as far as the economy is concerned,” Fratzscher warned. “Corporate bad debts could increase significantly because many are so in debt that they no longer receive or want any more bank loans, they have depleted reserves and the deferral of filing corporate bad debts will expire.”
According to Fratzscher, unemployment is likely to rise along with the problems companies face: “Above all, the weakest, like mini-workers, are likely to pay the highest price.”
