Economy & Politics

Comment: The situation is better than the mood

Like so many Christmas markets, the Striezelmarkt in Dresden is also canceledimago images / Mario Aurich

Nobody can get near the end of the year without looking back – what was going on this year! This week the “economic outlook” for the coming year was also read. First and foremost, they were always a look back, amazed and shocked at the same time: the economy in Germany collapsed by 11.5 percent in the first half of the year, industrial production fell by 30 percent back from February to April alone.

Within a few weeks, even days, millions of employees had to realize that ten or 20 hours a week would be enough for the remaining work, instead of the previous 40. Almost every fifth employee in Germany was “on short-time work” in May.

When the temperatures rose again and the number of people infected with corona fell, things went up just as quickly, plus 8.5 percent from July to September – such an upswing has rarely been seen before. And now, at the end of the year? Renewed uncertainty about the new lockdown, just before Christmas: anxious wait, but a lot of hope.

The prospects for the coming year are not that bad: The new lockdown is affecting the month of the year with the highest turnover. But because many retailers can now handle their sales largely over the Internet or have come up with other order channels, the failure will not be that high. The Munich-based Ifo Institute estimated this week that the retail trade will really miss out on only a few billion in added value in the second half of December and the first few days of January, thanks in part to many public holidays on which the shops would be closed anyway. That is still annoying, but in relation to the entire German economy this corresponds to a dampening of 0.1 to 0.2 percentage points.

The economists remain optimistic

The situation at the end of this year has to be summarized as follows: There are dreary images of empty shopping centers, pedestrian zones and restaurants – but they do not describe the situation of most German companies. In many places in this country, production lines and factories are running at full speed and overtime is still being worked shortly before the end of the year.

Most economic researchers remain optimistic for the next year: the hard lockdown will delay the recovery by a few weeks, maybe even two months, in the coming year – but then things will pick up again all the more. The comparatively cautious Ifo Institute says around 4.2 percent, and around 4.5 to five percent, say the research institutes in Berlin and Essen, DIW and RWI. This is the look ahead – after this terrible year 2020, but that is what matters: we know today how we can remove its contagion power from the virus; there are vaccines; we are prepared.

The upswing in the coming year will, however, be distributed very unevenly. There will be industries and regions that will start again in the spring of 2021 where they were stopped very abruptly and brutally twelve months earlier: The hotels on the North and Baltic Seas are among them, as are the health resorts in Bavaria, tourism in general and all companies in the travel industry; Restaurants and pubs, artists, theater, culture and concerts will soon follow – yes, a lot of people will probably flock to the cinemas again. All those for whom 2020 was particularly tough will be at least partially compensated with a return to normal in 2021.

2021 will also be a good year for other industries: retail will grow strongly, many people have forego major purchases this year and have saved money, and next year they will make up their purchases. Industry will also benefit from increasing global demand for large and small machines. This fits in with the fact that the business climate rose in December: the value still signals a slight downturn, but at its current level it is about to jump into a boom.

Problems loom in industrial regions

There will also be industries and regions in which the crisis won’t really hit it until 2021 – just when things are looking up elsewhere. Interestingly, it will affect those sectors and regions that came through the recession comparatively well in 2020 – mainly thanks to government aid instruments such as short-time working.

A study by the Ifo Institute in Dresden this week found that the corona pandemic had cost many jobs in the north and east – while unemployment had increased noticeably little in the industrially strong south and west, but short-time working was used much more.

We will probably see the following development next year: Where many jobs have been lost this year, many new ones will also be created next year. However, where jobs have been saved this year through short-time work, there is no guarantee despite the upswing – especially with the many suppliers to the automotive industry in the south and west, 2021 could be more difficult than it was this year.

What can we do in the next two or three weeks until the beginning of January? We can lay the foundation for a good 2021. By staying calm, persevering, exercising discipline – and using the time to make plans for the months after the pandemic: for a great vacation, a summer party with friends, a major purchase that many shied away from this year because of all the uncertainty to have.

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