Economy: crown restrictions during winter

reThe so-called economic savants believe that Germany will overcome the crisis of the Crown better than previously thought. In its annual report, the Council of Economic Experts assumes that gross domestic product will only decline by 5.1 percent this year due to the pandemic. This means that economists are more optimistic than the federal government, which assumes 5.5 percent less.

However, the forecast is associated with considerable uncertainty even more than in other years. Because even economies do not have a crystal ball, nor can they turn to comparative values ​​from the past: a global pandemic like the one caused by the corona virus simply did not exist in the last hundred years.

However, economists paint an overall optimistic scenario: “In the forecast, the Advisory Council assumes that the infection process can be kept under control with limited interventions, that an extensive shutdown is not necessary as in spring 2020 and that international supply chains are not significantly disrupted. ” says in the report.

However, the recovery of the German economy in particular depends not only on the decisions made at home, but also on how the pandemic plays out in important export markets. The Council of Economic Experts highlights that the latest developments, such as the second, much less strict, blockade that Germany has been in since November 2, are already included in the forecast.

But even economists are unsure whether the measures currently in place are enough to significantly reduce the number of infections again, and how long the second lock should be maintained. “The recent increase in the number of infections shows how fragile the situation remains,” write the economic experts. In several areas, a normalization of the economic situation is not yet foreseeable, the crisis of the Crown has not yet been overcome ”.

The November lockdown will have a negative effect of 0.2 percentage point on economic performance, said Lars Feld, chairman of the committee. It is the result mainly of the sectors affected by closures such as restaurants and the events industry. It is not yet known if there will be negative effects such as consumer reluctance. After all, people could also shop online from home.

However, economists have little hope that all the restrictions on the second lockdown can be lifted by the end of the month. “We assume that the restrictions could apply throughout the winter semester,” Feld said.

Overall, therefore, the economy is only expected to stagnate in winter, which will also mean that the recovery will be weaker throughout the next year. In their report, economic savants assume that German gross domestic product will rise 3.7 percent next year.

Biontech and Pfizer would not have improved the forecast

This means that the pre-crisis level of the last quarter of 2019 would not have been reached again by the end of 2021. However, by no means are only negative surprises possible; More positive developments are also conceivable if vaccines were readily available in large quantities.

However, Feld stressed that the prognosis would not have been more positive if the news this week that Biontech and Pfizer had developed an effective vaccine had already been known when the report was being produced. You may have chosen more positive wording in the text, but would not have corrected the numbers up.

This is mainly due to the fact that many unanswered questions remain, for example how many people will actually get vaccinated and how long the vaccine will remain effective in the next few years. Therefore, economic moderation is appropriate.

The fact that, despite all the uncertainties, economists are more optimistic about the evolution of the economic situation in their annual report than in their special report on the pandemic at the end of March, is due to the summer. In these months, the economy recovered faster than expected.

Therefore, the negative for the year as a whole will not be as high as, for example, in the financial crisis. However, according to economic savants, the era of positive surprises is over for now.

Corona measures positively evaluated

“In view of renewed pandemic-related restrictions, the recovery in Germany and many other European countries is currently on hold,” the report says. For Europe, experts expect an even more dramatic drop in economic output than in Germany, where the drop will be seven percent.

The effect on the labor market is only limited by the short-time assignment. The economy is assuming a slight rise in unemployment to 2.74 million next year, but the government’s aid measures prevent the economic recession from having a full impact on employment.

In general, economists rate the government’s measures in the Corona crisis as positive. At the moment it is particularly important that the sectors particularly affected by the second blockade are helped. However, the economy is skeptical about the temporary VAT cut.

So far, this has had little effect and therefore should not be expanded, Feld said. Above all, the government should improve the ability to recover losses for companies.

In general, the German state could definitely afford to fight the crown. The debt ratio will be lower than after the 2010 financial crisis. Therefore, the necessary consolidation after the Corona period should definitely be manageable.