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Still highly fragile

February 10, 2020
Region:
After very weak December data a small drop in Q4 GDP seems likely. Looking forward, the coronavirus provides a substantial risk for the expected global recovery, as hopes were pinned on an improvement of the Chinese economy. We assume that the corona outbreak will shave off 0.2pp of Germany's Q1 GDP, making a technical recession quite probable during the winter half. [more]

More documents contained in "Focus Germany"

89 Documents
July 9, 2020
Region:
1
With Germany’s rather successful COVID-19 strategy and the recovery and stimulus packages broadly agreed, the question of Merkel’s successor and the next German federal elections in autumn 2021 are gradually getting closer political attention again. Parties are currently not only preparing for the election, but are also arguing about the electoral law: the present law allowed the Bundestag to grow from 598 mandates to the current record size of 709 mandates, with the 2021 election likely to result in an even bigger number of seats. The Bundestag just failed to pass a reform before the summer break and thus in time for the 2021 elections. However, political and public pressure to find a solution is high and will keep the issue on the political agenda. [more]
June 26, 2020
Region:
2
How deep is your trough? Daily activity trackers suggest that the economy turned at the end of April as lockdown measures were gradually lifted. But we still expect a double-digit decline in Q2 GDP. The EUR 130 bn fiscal package was somewhat above our earlier expectations but does not change our GDP forecast, especially as still-prevailing pandemic uncertainties might curtail the economic impact of the package. But upside risks to our -9% GDP forecast for 2020 have (somewhat) increased. (Also in this issue: corona pandemic update, German public finances, global trade, German tourism during the corona crisis, German politics goes European) [more]
June 10, 2020
Region:
3
Germany has got COVID-19 under control faster than many other countries. It also recorded one of the lowest infection fatality rates among the G10 countries. The complete fiscal policy U-turn in response to COVID-19 induced economic damage should allow the German economy to weather this crisis better than many other countries – although the impact will still be massive. We have identified six structural features of the German society contributing to its superior collective resilience. Due to these features we expect the German recession in 2020 to be less severe than in most other industrial countries. This crisis resilience should also further improve Germany’s relative position among the major industrial economies once COVID-19 has been overcome. And this will increase pressure on Germany to play an even more supportive role within EMU/EU in the medium term. [more]
June 4, 2020
Region:
4
The coalition committee agreed on a so-called “Fiscal Stimulus and Crisis Management Programme”. The overarching goal of the programme is to boost the economy, secure employment, unleash Germany’s economic potential, mitigate the adverse economic and social consequences due to the crisis, strengthen the federal states and municipalities and, finally, give financial support to families. The promised rise in “future investment” is per se a good thing to boost the economy. Still, timely implementation could be an issue. Hence, these additional investments will help raising Germany’s growth potential but are unlikely to have any meaningful effects on economic growth in the short run. [more]
June 3, 2020
Region:
5
As a consequence of the COVID-19 crisis continental value chains could gain in importance. Our network analysis illustrates the global trade network pre-COVID-19. We depict the global trade network of 90 countries as well as the most important intracontinental trade relationships. Trade links between Asian and American countries seem especially vulnerable to a reorganization of global value chains. [more]
May 25, 2020
Region:
6
Based on DB’s GDP forecast, due to the COVID-19 crisis annual global goods trade will shrink by 13.6% in 2020 and will recover by only 7.5% in 2021. Global goods trade is set to fall much heavier than during the GFC. The COVID-19 crisis might result in a reorganization of global value chains, at least in some sectors. For instance, there are requests to repatriate the provision of medicines and medical devices back to developed markets. However, a more balanced approach between today’s global value chains and a complete repatriation could be continental production close to developed markets. [more]
May 18, 2020
Region:
7
All German export markets will be hit hard by the COVID-19 crisis. We foresee great variation among key countries and expect annual exports to the UK and Italy to decline by around 25% in 2020. Large contractions in German exports are also expected for France, Spain and the euro area as a whole. By contrast, exports to Asia may emerge relatively unscathed from the crisis. We expect exports to the US to shrink by around 10% in 2020. However, this forecast seems particularly uncertain to us as the risk of a new wave of infections and new lockdown measures could be higher in the US than elsewhere. [more]
May 14, 2020
Region:
8
The COVID-19 pandemic and, in particular, lockdown measures will push the German economy into its biggest slump since WW2. The COVID-19 pandemic hits German labour market differently than the Global Financial Market Crisis of 2009. First, it is acting almost simultaneously as a supply shock and, as a result of the measures to restrict contact, as a demand shock. Second, is the speed and the might with which it has brought the economy to a standstill in many areas of Germany and around the world. Third, private consumption will suffer the biggest blow. During previous periods of economic weakness, private consumption has always been a supporting pillar of the German economy and thus also provided a counterweight to employment losses in export-oriented companies. At present, however, the domestically oriented and personnel-intensive service sector is failing as a driver of employment. By April 26th, 751,000 companies had already registered for short-time work. This should imply an increase in the number of people actually on short-time work to up to 10 m. Despite the comprehensive measures to secure employment, which ultimately include support measures for companies, the number of unemployed persons is expected to climb to 3 m in 2020. Employment is likely to fall in 2020 by a good 1%. [more]
May 8, 2020
Region:
9
Weaker-than-expected March hard data and shocking April survey data point to a lower trough in economic activity than assumed so far. We now see Q2 GDP falling by 14% qoq, with the risks still skewed to the downside. In the 2009 recession, private consumption acted as a massive shock absorber. Given the lockdown, social distancing and a likely severe hit to income expectations, we expect private consumption to fall by 10% in 2020. The asynchronous global development of the COVID-19 pandemic and lasting impediments to global trade, will make the recovery, which began in May and will become more evident in H2, less dynamic than hoped for earlier. As a result, we expect German GDP to decline by 9% this year and to expand by about 4% in 2021. [more]
April 17, 2020
Region:
10
The German government has responded quickly and decisively to the economic fallout from the corona pandemic. Altogether, Germany’s anti-crisis measures – consisting of extra spending, guarantees and loan/participation programs – sum up to an astronomic value of around EUR 1.9 tr (well above 50% of GDP in 2019). This gives the government huge scope to fight the pandemic and economic crisis. In this note we try to quantify Germany’s fiscal costs from the corona crisis. [more]
April 16, 2020
Region:
11
Merkel’s cabinet in consultation with the PMs of the 16 federal states agreed to partially lift containment measures but curbing health risks clearly dominated economic risks of a longer shutdown. The decisions taken will be reviewed on a bi-weekly basis with the next meeting of political leaders on April 30. A European coordination of (national) exit strategies is important for Germany given its strong economic interlinkages with other member states. [more]
March 19, 2020
Region:
12
Fighting the corona crisis: Whatever it takes. The government’s support measures so far include greater access for firms to short-time allowance, tax moratorium and the potential provision of state guarantees of up to EUR 460 bn. We expect the government to come up with additional fiscal stimulus measures soon. The budget balance could post a deficit of 3.5% of GDP in 2020/21. (Also in this issue: KfW programmes to support corporate Germany – A primer. Corporate lending in a corona recession: Development banks as an anchor of stability?) [more]
6.8.1