According to the federal government, the slump is likely to be less severe than initially feared. But the recovery remains fragile. Some economists are preparing audiences for bad news again.
Berlin – According to the federal government, the German economy will need at least another year to get out of its pandemic-related low. Economics Minister Peter Altmaier (CDU) made this clear on Friday when he presented his autumn projection in Berlin.
The economic downturn in the current year will be less drastic than initially feared. Strong growth is expected again in 2021, although the forecast remains fraught with many uncertainties. The pre-crisis level of economic output will “be reached again at the turn of the year 2021/2022 at the earliest,” write Altmaier’s experts.
The government sees the economy at a crossroads
In view of the second corona wave, the government sees the economy at a crossroads. “The pendulum can swing in one direction or the other,” said the minister. He once again defended the decision of the federal and state governments last Wednesday to send parts of the economy such as the gastronomy or the culture and leisure industry into a new lockdown for four weeks in November. Affected companies and solo self-employed are to be supported with billions in aid during this time. Altmaier said that the second corona wave must now be countered as resolutely as the first one in spring. Only if the curve of new infections can be flattened again can the economic recovery process continue and serious damage to companies and employees prevented. Normality could only return when a corona vaccine is available.
For the current fourth quarter, Altmaier expects growth of 0.4 percent
Specifically, the government now expects the German economy to shrink by 5.5 percent this year. The government is now somewhat more optimistic than before: In the spring projection, Altmaier had assumed a drop of 6.3 percent, in an interim projection at the beginning of September of 5.8 percent.
In the spring, economic output collapsed by ten percent as a result of the first lockdown. From July to August it rose by 8.2 percent compared to the previous quarter, announced the Federal Statistical Office. This shows that the German economy is able to unleash growth forces even under pandemic conditions, said Altmaier. For the current fourth quarter he still expects growth of 0.4 percent. The expected effects of the partial lockdown in November have already been taken into account.
Altmaier is optimistic
The economic chief of the Munich Ifo Institute, Timo Wollmershäuser, said that the measures decided on Wednesday put “an abrupt end to the strong recovery from the summer”. The union-affiliated Institute for Macroeconomics and Business Cycle Research (IMK) of the Hans Böckler Foundation expressed a similar opinion. Due to the worsened infection situation, “a new decline in economic output is even possible,” said IMK boss Sebastian Dullien. At the same time, he emphasized: “The strong economic recovery in the third quarter shows how effective a resolute policy to support the economy is even in times of pandemics.” According to the projection of the German government, the German economy will grow by 4.4 percent in the coming year and then by 2022 2.5 percent. Minister Altmaier was clearly trying on Friday to spread optimism despite the difficult situation. He referred several times to the surprisingly strong growth in the third quarter. The federal government’s stimulus package of 130 billion euros is having an effect, said the minister.
The infection situation in Asia has stabilized
Despite the massive restrictions on public life that are now pending again, the situation for the economy is fundamentally different from that in spring. The infection situation in Asia has stabilized, which is particularly important for German exporters. There are now no border closings in Europe, which is why the supply chains remain intact. In addition, all branches of the economy have learned to create hygiene concepts and to implement them.
The economic policy spokesman for the FDP parliamentary group, Reinhard Houben, said: “Because whether the new lockdown for the economy will go as lightly as assumed is completely open.”