What is severe economic inadaptability
Altmaier: Corona pandemic leads economy into recession. If economic and social life have to start up with a sense of proportion, then recovery is possible in the second half of the year
The corona pandemic is plunging the global economy and with it the German economy into a recession. The federal government expects the gross domestic product to decline by 6.3% in 2020 (price-adjusted). In the course of the catch-up process, growth of 5.2% is expected for 2021.
Federal Minister of Economics Altmaier:
“After 10 years of growth, the effects of the corona pandemic are leading our economy into recession. In order to keep the economic consequences as low as possible, we countered with an unprecedented protective screen of over 1 trillion euros. The aim must be that we maintain the substance of our economy and accompany our companies and our employees through this crisis. Nevertheless, we will have to accept significant cuts in economic output this year.
We are facing great challenges, economically and politically. I am aware of the unreasonable demands that many measures entail. I would therefore like to express my thanks to the economy and the population for the constructive cooperation. We must now intelligently develop our protection strategy further. In doing so, we must not rush to risk a second high increase in the number of infections. Because only if we ramp up economic and social life with a sense of proportion can we start a slow recovery again in the second half of the year. "
The projection of the federal government takes into account that the far-reaching measures to restrict social contacts in public spaces for the protection of health and life were retained from mid-March and the entire month of April. Thereafter, a gradual and moderate relaxation of the behavioral measures is assumed. The strongest slump in economic output will therefore take place in the course of the second quarter of this year. After that, economic activity begins to pick up.
More details of the projection:
- The effects of the corona pandemic are plunging the global economy into a severe recession, the extent of which is greater than the 2008/09 financial crisis. Based on the forecasts of international organizations (IMF, OECD), we expect global economic output to decline by 2.8% on average in 2020 and a recovery of 5.7% in 2021.
- Declines are to be expected in almost all expenditure components of the gross domestic product. Due to the negative development of the sales markets, German exports will decline by 11.6% in 2020 (2021: + 7.6%).
- The lower domestic demand and the lower need for intermediate goods from abroad are noticeable in imports. Not least because of the extensive measures to support income and demand, imports are not falling as sharply as exports (-8.2% in 2020 and +6.5% in 2021).
- Therefore, the German current account surplus in relation to nominal gross domestic product is likely to decrease in 2020 and remain well below the level of 2019 in 2021.
- Investment in equipment is closely related to the capital-intensive export industry. As a result of the pandemic-induced recession in the manufacturing sector and the general increase in uncertainty, we are expecting a significant decline in investments in equipment in the first half of 2020. However, as the economic recovery gradually sets in, they are likely to pick up again somewhat in the further forecast period.
- The demand for construction investments is driven on the one hand by the persistently low interest rate environment and on the other hand by increased liquidity, but at the same time suffers from falling incomes. In addition, shutdown measures (border closure) and the increased uncertainty are also having an impact in construction. We therefore anticipate a slight reduction in construction investments in the current year (-1.0%) and a cautious expansion in 2021 (+1.1%).
- Government consumer spending will continue to support demand in the forecast period (2020: + 3.7%, 2021: +1.3%). Expenditures for government investments will also continue to increase sharply in the forecast period (2020: + 3.9%, 2021: 2.3%).
- The labor market is coming under great pressure. In the current year, employment is expected to decrease by 370 thousand people. The hospitality industry, trade and business services, which also include temporary employment, are particularly affected. Short-time working will increase in unprecedented proportions in March and April and prevent many layoffs. Unemployment should rise to an annual average of 5.8%.
The macroeconomic benchmarks of the spring projection form the basis for the tax estimate from May 12th to 14th, 2020. They serve as a common orientation framework for drawing up the public budgets of the federal, state, municipalities and social security funds.
Key figures of the spring 2020 projection
|Change in gross domestic product (price-adjusted)||2019||2020||2021|
|Change compared to the previous year in percent|
|Gross domestic product ||0,6||-6,3||5,2|
|Consumer spending of private households ||1,6||-7,4||6,5|
|State consumer spending||2,6||3,7||1,3|
|Gross fixed capital formation||2,6||-5,0||3,5|
|- including equipment||0,6||-15,1||8,7|
|- Other facilities||2,7||2,0||2,5|
|Changes in stocks and net additions to valuables (impulse)||-0,9||0,0||0,0|
|External contribution (Impulse) ||-0,4||-2,1||0,8|
|Consumer spending of private households ||1,3||0,3||1,4|
|gross domestic product||2,2||1,7||1,5|
|Consumer price index||1,4||0,5||1,5|
|absolute values in million people|
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