The economists agree: the most important factor for the economic development in 2021 is the further course of the corona pandemic. “That is the central unknown for the coming year,” says Timo Wollmershäuser, Head of Economic Research and Forecasts at the Ifo Institute. Of course, Brexit is imminent and there is a new US president who could have a significant impact on the global economy. “But these things are on the back burner,” said Wollmershäuser.
The most important influencing factor is the infection rate, says Oliver Holtemöller, Deputy President of the Leibniz Institute for Economic Research Halle (IWH). Ultimately, it depends on how the economy develops in the coming year: “As long as the epidemic prevails and new lockdowns are always an option that must be taken into account, the economic recovery will be slowed and no return to normalcy will be possible,” he says. With comprehensive vaccinations, the situation should then gradually relax.
“The vaccine is the game changer,” says Stefan Kooths, director of the Research Center for Business and Growth at the Kiel Institute for the World Economy (IfW). In its forecast, the IfW assumes that the particularly vulnerable groups will be vaccinated by around April and then vaccination of the rest of the population will begin. “If all of this turns out to be impracticable, we will have to face the restrictions longer and the recovery will drag on,” he says.
Stumbled start, but quick recovery
The economic consequences of the second wave are likely to have a significant impact on the coming year. “If we see that compared to autumn, we will have a bumpy start to the new year, because we will have another significant setback over the winter half-year from the second wave and the measures,” says Kooths. This essentially applies to the service sectors. “It’s tough for them, but they can start again as soon as the measures are relaxed.” Meanwhile, the industry is robust.
“We are starting off with a weak start to the year, but we expect the expansion to be strong in the further course of the year,” says Kooths. The IfW is assuming an overall increase in gross domestic product of 3.1 percent for 2021. The second wave will interrupt the recovery for half a year, according to the forecast.
IWH economist Holtemöller also assumes that the economic recovery will set in quickly: “If the German population has been sufficiently vaccinated, people no longer have to worry and there are no longer any official restrictions, then things will happen quickly,” he says. He is certain that as soon as it is allowed to go to restaurants and bars again, people will take advantage of this opportunity again. “Then recovery can take place relatively quickly.”
A financial buffer has accumulated in private households because less money has been spent, according to Holtemöller. “If the consumption is effective, that could give a very clear upswing.” But all of this is also subject to the infection occurrence. The IWH expects GDP growth of 4.4 percent in the coming year.
Third quarter gives hope
A look at the third quarter of 2020 shows a positive trend: “The good news is: The recovery was much faster than we thought,” says Ifo Economic Director Wollmershäuser. This recovery came mainly from the areas that were “switched off”. “When they were turned on again, it went up again as quickly as it went down,” he says. This applies, for example, to service providers who suddenly reopen and make sales. Short-time work also helped here.
“As soon as the shutdown is over and as soon as we reopen the catering and other areas, things will quickly get up again,” says Wollmershäuser. For 2021, the ifo Institute is forecasting GDP growth of 4.4 percent. This is based on the assumption that the Lockdown Light will remain in force until the end of March 2021. It is also assumed that vaccinations will start in January and that protective measures can be relaxed from April. The tightened measures of the hard lockdown have not yet been included in the forecast.
Backlog in bankruptcies
When it comes to bankruptcies, there will certainly be some catching up to do, says Holtemöller. This year there were far fewer bankruptcies than was to be expected given the economic trend. This is partly due to the suspension of the deadline, but also to the assistance. “The aid helps companies stay afloat in a difficult situation. In this respect, not all bankruptcies will have to be made up, ”said Holtemöller. In the catering industry, a number of businesses could go bankrupt. But in this area new companies are likely to be founded again quickly, says Holtemöller: “When the demand is there again, the supply will adjust to it again”.
The bankruptcies are one of the big unknowns in the coming year, says Timo Wollmershäuser. Every recession leads to bankruptcies, but the state gives companies a hand. “The liquidity aid is flowing, but the aid does not arrive everywhere and not everywhere on time, even if the state is quick,” says Wollmershäuser.
According to Wollmershäuser, the indirect consequences of the corona pandemic could also lead to bankruptcies. “If anything remains of this crisis, then it is certain that it has accelerated structural change,” he says. That always means that there are winners and losers. “Due to the accelerated change, there will also be bankruptcies that have nothing to do with the fact that the companies can no longer generate sales, but with the fact that it is clearer than before that the business model of these companies may not be the business model of the future is “, says Wollmershäuser.
Shutdown decisions have an impact
It is expected that the November and December shutdown resolutions together will cost 40 to 50 billion euros in economic output in the winter half-year, says Kooths. “That has a clear impact on the annual rate of 2021,” he says. Because of this weak start to the year, the IfW has also lowered its forecast from 4.8 to 3.1 percent. But that says nothing about the economic dynamism in the coming year. “Starting in spring, we will see a similar economic dynamic as we expected in autumn for this period,” says Kooths. Then there is more to catch up. “The third quarter showed us how quickly economic activity can come back once the brake pads are gone,” he says.
The Ifo Institute assumes that the Lockdown Light, if it lasts until the end of March, will cost 36 to 37 billion euros, said Wollmershäuser. The economic effects of the closure until January 10th are manageable. It is estimated that another two billion euros in added value will be lost by the tightening of the hard lockdown by January 10th. The closure only affects stationary non-food retailers. A large part of this turnover goes to online trading. “We estimated that at half of the sales,” says Wollmershäuser. Of course, every day, every week that the closings last longer increase the costs. According to Wollmershäuser, things should actually improve again in the first quarter. “If the retail trade is closed now – and not just until January 10, but maybe until the end of January or the end of February, then the plus will quickly turn into a minus,” he says.