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Economists: Economy recovers from corona shock – risk remains

Half a year after the corona lockdown, the German economy is on the road to recovery, according to economists. “It is now becoming apparent that – at least in Germany … the situation is not quite as gloomy as the mood was in the meantime,” said Jens-Oliver Niklasch from Landesbank Baden-Württemberg in a survey by the German press agency.

Leading economic research institutes had revised their forecasts for economic performance upwards. For example, the Munich Ifo Institute and the Institute for Labor Market and Occupational Research in Nuremberg are assuming that the gross domestic product will only shrink by 5.2 percent in the current year – that would be less than in the financial crisis of 2008/2009.

“The signs point to recovery,” said Niklasch. “This is shown by the leading indicators, and the hard facts on production and consumption also show that.” Over all the prognoses, however, hangs the sword of Damocles from a second phase of severe restrictions on public life. At the moment there seems to be a consensus in politics that it is absolutely essential to prevent such a step. “Whether this agreement will still prevail when the pandemic reaches the advanced age groups again and the death rate increases has not yet been determined,” he emphasized.

Marc Schattenberg from Deutsche Bank also sees the economy back on track, but also warned against excessive euphoria. A wave of bankruptcies, especially among small businesses, at the beginning of next year cannot be ruled out. Uncertainties about the election outcome in the US in November and Brexit would also be external risks. It should also be borne in mind that the Corona crisis – unlike the financial crisis more than ten years ago – is deeply affecting economic structures. “The crisis is of a different nature,” said Schattenberg. An open question is, for example, whether supply chains can continue to be represented globally, or whether in future they will have to focus more on Germany and neighboring European countries.

The chief economist of the state banking group KfW, Fritzi Köhler-Geib, believes that a slowdown in the recovery process due to government regulations is possible. “A renewed slump in economic activity is unlikely,” she emphasized. “Because the people in Germany are by and large behaving in a disciplined manner and the findings from the spring allow a more regionally targeted approach to the pandemic.”

On the other hand, Allianz economist Katharina Utermöhl has more warning words: “The honeymoon phase of the current economic recovery is coming to an end,” she said. In her opinion, it should be uncomfortable again in autumn. Even without a pronounced second wave of infections, she advises you to take economic setbacks into account.

“The expiry of the supportive catch-up effects will make it unmistakably clear that the current economic recovery will not be a sure-fire success in view of the ongoing contagion worries, the continued strong increase in economic uncertainty and the asynchronous global economic recovery,” said Utermöhl.

The labor market has shown itself to be a robust pillar of the economy, also thanks to state aid, such as short-time work benefits. “The feared rise in unemployment above the 3 million mark seems to have been averted for the time being,” said Köhler-Geib. Niklasch emphasized that Germany’s employees were “surprisingly robust and got through the crisis with the” doping “of state-financed short-time work.”

Forecasts on the development of the labor market are currently particularly difficult, said Deutsche Bank economist Marc Schattenberg, among other things because the seasonal effects do not come into play in the usual way.


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