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Why we should expect a much stronger recession in Germany in 2020 than widely believed

  • We examine the effects of the COVID-19 pandemic on the economic decline expected in Germany in 2020. The magnitude of the economic slump that will occur in 2020 depends on the extent of the slump during the shutdown, on the point in time, at which a significant easing of shutdown occurs, and on the length of adjustment process towards the structures that prevailed before the pandemic. We derive several scenarios and find that the shutdown will only remain in the single-digit percentage range if we apply very optimistic assumptions about the extent of the initial decline in GDP during the shutdown and the speed of adjustment after opening up of the economy. However, assuming that the economic crisis cannot end before the medical crisis ends, which medical experts project not to happen before the end of 2020, such optimistic assumptions do not appear realistic. Hence, we find it more likely that the percentage decline of GDP in Germany will be two-digit in 2020. Our findings are in contrast to the growth projections recently issued by the German Council of Economic Experts or by the Federal Ministry of Economic Affairs and Energy of Germany.

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Metadaten
Author:Michael Frenkel, Haiko Stefan
URN:urn:nbn:de:hbz:992-opus4-8140
Series (Serial Number):WHU – Working Paper Series in Economics (WP 20/03)
Publisher:WHU - Otto Beisheim School of Management
Place of publication:Vallendar
Document Type:Working Paper
Language:English
Date of Publication (online):2020/06/08
Date of first Publication:2020/05/15
Publishing Institution:WHU - Otto Beisheim School of Management
Release Date:2020/06/08
Tag:Coronavirus-Krankheit 2019; Deutschland; Folgen; Rezession
COVID-19; Germany; Impact; Recession
Page Number:8
Institutes:WHU Economics Group / Chair of Macroeconomics and International Economics
JEL-Classification:E Macroeconomics and Monetary Economics / E0 General / E01 Measurement and Data on National Income and Product Accounts and Wealth
E Macroeconomics and Monetary Economics / E2 Macroeconomics: Consumption, Saving, Production, Employment, and Investment / E20 General
E Macroeconomics and Monetary Economics / E3 Prices, Business Fluctuations, and Cycles / E37 Forecasting and Simulation
O Economic Development, Technological Change, and Growth / O5 Economywide Country Studies / O52 Europe
Licence (German):Copyright for this publication