Is there a recession

Economic consequences of COVID-19What a recession means for Germany

What is a recession?

The economy is in constant evolution. However, this fluctuates - economic growth, or gross domestic product (GDP), is therefore divided into four economic phases. One of these phases is the downturn: a recession. In the national economy, one speaks of a recession when the GDP shrinks for two quarters in a row (compared to the previous quarters).

The four economic phases describe the economic developments. (Deutschlandradio)

A recession is a phase in which economic growth declines and which is characterized, among other things, by falling demand and production as well as rising unemployment. For example, falling demand and unemployment are mutually dependent. Those who earn less money consume less.

Measures against the spread of the coronavirus are now likely to have a similar impact on the economy. Production has been shut down, shops and restaurants are closed, there are layoffs and short-time work, which is why the demand for goods is falling. Economists are therefore predicting a recession for Germany. The last time there was a recession was in 2009 as a result of the financial crisis.

What was the economic situation like before the corona pandemic in Germany?

According to the Federal Statistical Office, the German economy has grown over the past ten years. However, growth slowed somewhat in 2019. According to the Federal Statistical Office, the economy was mainly supported by private and state consumption as well as investments in civil engineering and residential construction. The services and construction industries recorded significant increases.

All articles on the coronavirus can be found here (imago / Science Photo Library)

The annual economic report of the Federal Ministry of Economics, which was published at the end of January, expected growth of 1.1 percent for 2020. The development on the labor market was assessed as positive. But: According to the Federal Ministry of Economics, the upturn in the economy, which is indicated at the beginning of 2020, will now be stopped by measures against the spread of the coronavirus.

What economic consequences do experts forecast from the corona pandemic?

Since the effects of the corona pandemic are only just developing, there are no exact figures yet, but forecasts by economists.

Last year, among other things, private consumption of services supported the German economy. Such consumer-related services - such as restaurants and cafes - are hardest hit, according to the Bundesbank's March monthly report, which expects a pronounced recession. For example, are likely to Hospitality, exhibition, entertainment and airline companies be severely affected by falling demand and precautionary closings. The Bundesbank is also anticipating a significant drop in demand for German exports.

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According to calculations by the Munich Ifo Institute the effects of the pandemic could cost Germany more than half a trillion euros and more than a million jobs. Ifo President Clemens Fuest said that the crisis will lead to massive upheavals on the labor market. In the most extreme case, the institute expects an economic deficit of up to 20 percent.

The banking association, on the other hand, is more optimistic. After a likely deep recession in the first half of the year, the economy will recover in most countries - as seems to be the case in China too.

The Market research institute GfK expects consumer sentiment to be depressed in April and forecasts a decline of 5.6 to 2.7 points for the consumer climate index. This means that consumers spend less money. The increase in corona infections and the associated restrictions would have led to the break-in.

An unprecedented economic slump in the euro area is also expected for the European Union due to the corona crisis this year. For 2020, a drop in economic output of 7.7 percent for the euro countries and 7.4 percent for the 27 EU countries is expected, said the Brussels authority in its spring forecast. The EU Commission expects a recovery again next year. The forecast states that in 2021 things should go up by 6.3 percent.

What does a recession mean for citizens?

Since many companies have to save or close, there may be short-time working and layoffs. According to an Ifo survey, companies are currently also stopping new hires.

For many, this means a lower income. The various professional groups are affected differently. While the self-employed and small business owners often have little coverage, civil servants hardly feel the effects. The Federal Association of Consumers advises you to find out about possible help from the federal government at an early stage and to plan expenses precisely.

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