Germany has been in lockdown since mid-December, and easing has been in place since March. Several research institutes are therefore lowering their economic forecasts – and some are harshly criticizing them.
The economic researchers from the Munich Ifo Institute have sharply criticized the current corona policy of the federal and state governments. On the occasion of the current forecast for economic output in Germany, Ifo economist Andreas Peichl said: “At the moment a lot is going wrong. Politicians are repeating the mistakes from autumn.”
Economically, it makes much more sense to act differently. “We shoot large areas with the shotgun in the forest and hope to hit something instead of being targeted.” According to Peichl, who is a supporter of the so-called no-covid strategy, it would be better for the economy to do a consistent hard shutdown instead of alternating loosening and lockdowns over and over again.
“The federal and state governments have recently decided to relax haphazardly – without a sophisticated test strategy and without us properly using the data on the occurrence of infections,” said Peichl.
Ifo Institute corrects economic forecast downwards
The consequences for companies and consumers: high uncertainty and little prospect of long-term, permanent relaxation of the pandemic and thus the economic slump. The Ifo Institute has accordingly corrected its growth forecast for the current year downwards.
In view of the ongoing lockdown, the Munich economic researchers are now expecting economic growth of just 3.7 percent. In December they had expected 4.2 percent. “The corona crisis is dragging on and postponing the expected strong upswing,” said Ifo economic director Timo Wollmershäuser. The corona crisis is expected to cost 405 billion euros by the end of next year, measured in terms of the loss of economic output.
It depends on how the crisis unfolds
Economic output slumped by 4.9 percent in the past Corona year, and unemployment rose. According to the Ifo forecast, the number of unemployed is likely to decline slightly this year from 2.7 to 2.65 million. The unemployment rate would fall from 5.9 to 5.8 percent. Consumer prices are likely to rise by 2.4 percent.
However, all of this depends crucially on the further course of the crisis, emphasized the economic researchers. “If sales in the service industries directly affected by the Corona crisis persist for another three months at the low level of the first quarter, the increase in economic output this year would be 0.3 points lower and only 3.4 percent lie “, explained Wollmershäuser.
If there were no major easing until June, the costs would also increase. Specifically, the economists expect that in this case, additional damage of around 13 billion euros would result. “At the same time, however, it is also true that there would then be no further negative impulse,” explained Wollmershäuser. The reason: The German economy is already at a low level, only positive developments are missing.
When will the bankruptcy wave come?
He continues to rate the risk of the recently much discussed wave of insolvencies as high. “It is clear that it will come – solely because of the structural change that Corona is accelerating,” said Wollmershäuser, referring to companies whose business model is permanently affected by the corona-induced digitization boost, for example airlines and hotels that primarily earn their money with business trips.
However, it is difficult to predict how big the wave of bankruptcies will be and when exactly it will occur. However, it is unlikely that it will occur in the short term. The background to this is the ongoing exemption from the statutory obligation to file for insolvency.
Other institutes lower their forecasts
In addition to the Ifo Institute, the German Economic Institute (IW), which is close to the employer, and the Institute for Macroeconomics and Economic Research (IMK), which is close to the trade union, published their forecasts for gross domestic product (GDP) for the current year. The IW therefore only expects a plus of 3 percent instead of the previously assumed 4 percent.
“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.”
The economists at the IMK, on the other hand, were more confident. The institute expects GDP to grow by 4.9 percent. The drivers for this are increasing exports and a recovery in consumption. “Unfortunately, the corona pandemic is far from being defeated medically, and risks remain. But after the tough year 2020, economic signs point to relaxation for the time being,” said IMK Director Sebastian Dullien.