Wednesday March 24th 2021
Economist fears opening yo-yo
Lockdown already costs 250,000,000,000 euros
In view of the ongoing pandemic restrictions, leading institutes are lowering their growth forecasts for the German economy, albeit at different levels. The gross domestic product is only likely to grow by 3.7 percent this year and not – as expected in December – by 4.2 percent, predicts the Munich-based Ifo Institute. “The corona crisis is dragging on and postponing the expected strong upswing,” said Ifo economic director Timo Wollmershäuser. At the end of the year, the pre-crisis level should then be reached again.
The German Economic Institute (IW), which is close to the employer, even expects a plus of three percent instead of the four percent previously assumed. The council of experts for assessing macroeconomic development, the so-called economic wise, had recently lowered its economic forecast to 3.1 percent. The union-affiliated Institute for Macroeconomics and Business Cycle Research (IMK) is spreading more confidence and is forecasting a plus of 4.9 percent – driven by rising exports and a recovery in consumption.
For 2022, the Ifo Institute raised its forecast from 2.5 to 3.2 percent. Overall, the costs of the pandemic for the years 2020 to 2022 should add up to 405 billion euros – measured in terms of lost economic output. In 2020 the economy collapsed by 4.9 percent. According to the Ifo analysis, the lockdowns alone have so far cost 250 billion euros. But it could get much more expensive.
Division of the economy threatens
Ifo financial expert Andreas Peichl took the politicians into court: “People act haphazardly and discuss secondary theaters of war instead of pushing ahead with important things such as vaccination, testing and data analysis.” After the “permanent yo-yo” when opening and closing, he feared the almost “next lockdown probably over Pentecost, then the prospects are even bleaker”.
“The pandemic is far from over,” warned IW Director Michael Hüther. “The lockdown will be extended until after Easter, vaccination will stall, people consume little and companies are not investing as they did before the crisis.”
According to the IMK, the driving forces of growth this year are the very dynamic foreign trade and private consumption: the latter will gain momentum if restrictions are relaxed and consumers can spend the money saved during the crisis. Investments are also likely to deliver noticeable positive impulses, as the IMK forecast shows. The IW observes with concern an increasing division in the German economy. The industry, which is benefiting from demand from China and the USA in particular, is supporting the economy. The service sector, on the other hand, is largely at a standstill.