“Economies” consider deep recession inevitable

Berlin / Wiesbaden. The “economic modes” consider a severe recession in Germany to be unavoidable due to the massive consequences of the coronavirus crisis. At the same time, the massive restrictions on public life and the economy in the corona crisis are inevitable from the point of view of “economic practices”. Economy and health should not be set off against each other now, said the chair of the expert panel, Lars Feld. “The insight of the individual is very important in this situation.”

The German economy will shrink significantly in 2020, according to a special report by the Council of Experts to assess the overall economic development.
How bad it is exactly is currently unclear because of great uncertainties. “The decisive factor for economic development is whether it is possible to effectively combat the spread of the coronavirus so that the various restrictions on social and economic activities can be lifted quickly,” write the economists in their report.

Three possible scenarios

The Advisory Board of the Federal Government as an advisory body uses three conceivable scenarios. “In all three scenarios, the spread of the coronavirus abruptly ends the emerging economic recovery, so that a recession in Germany in the first half of 2020 will be unavoidable.””
Economists see the normalization of the economic situation over the summer as currently the most likely development so that the bottom line is that gross domestic product (GDP) will shrink by 2.8 percent this year. For comparison: in 2009 the largest European economy collapsed by 5.7 percent as a result of the global financial crisis.
In the two less favorable scenarios, a deeper slump in 2020 would be conceivable from an economic perspective, which may be followed by a very slow recovery in 2021. This scenario in the form of a “long U” could occur if the health policy measures continue beyond the summer and the economic recovery does not start until 2021. “The policy measures taken may not be enough to prevent profound damage to the economic structure.” In such a scenario, GDP would shrink by 4.5 percent. In 2021, economic output would grow very slowly at 1.0 percent.

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