Altmaier corrects growth forecast upwards

Fear of another lockdown is growing in the economy. Economy Minister Altmaier, however, spreads optimism.

Peter Altmaier (CDU), Federal Minister for Economic Affairs and Energy

Ahe one thing you can actually rely on in Berlin: on the jam-packed appointment calendar of Federal Minister of Economics Peter Altmaier (CDU). His working days like to start at eight in the morning with the first background rounds and end in the evening with greetings at various industry events – even if in the end mostly virtual and not on site in the government district.

On Monday, however, a message from Altmaier’s ministry showed that, from his point of view, the corona situation must be very serious. The “social partner talk” planned for the evening with the chairmen of the German trade union federation and the employers’ association BDA was canceled at short notice. The reason: the “recent dramatic increase in the number of infections caused by Corona and the related appointments” by the minister.

However, this drama is not yet reflected in Altmaier’s latest growth forecast. As reported in government circles on Monday, he even wants to increase this slightly on Wednesday. According to government estimates, the gross domestic product (GDP) will no longer drop by 5.8 percent this year compared to 2019, but “only” by 5.5 percent.

This converges the forecasts made by Altmaier and the five leading economic research institutes. In their autumn forecast, the latter predict a decline in economic output of 5.4 percent for this year. For comparison: In 2009, the year after the financial crisis, German economic output fell by 5.7 percent. So the current recession would not be the worst in post-war history, as was feared in the spring. However, the figures from then and now can only be compared to a limited extent because the investment bank Lehman Brothers went bankrupt in September 2008, so part of the slump was already reflected in the figures that year.

The dreaded L-word

Altmaier’s outlook for the coming year is almost even more interesting than the forecast for this year: According to reports, he continues to expect growth of 4.4 percent for 2021. Observers had expected that the forecast for the coming year would fall, after all it is becoming increasingly clear that the economy will suffer from the Corona precautionary measures for much longer than expected. Health Minister Jens Spahn (CDU) expects a vaccine against the virus at the beginning of next year at the earliest.

Even then, it will take months, if not years, before so many people are vaccinated that the virus is no longer dangerous. The Robert Koch Institute recently announced that distance rules and mask requirements would have to remain in place for the time being, even with a vaccine. This does not mean anything good, especially for retail, gastronomy and the event industry. Economical operation in these industries will be unthinkable anytime soon. Altmaier has therefore recently announced that it will extend the aid programs until mid-2021 and increase them even further for the sectors particularly affected.

In any case, all forecasts made now, be they by the government or economists, are subject to the reservation that the dreaded L-word does not come about: the lockdown. If politics were to close large-scale retail, catering and schools again, as in the spring, the consequences would hardly be foreseeable, business representatives have been warning for weeks.

Lockdown or agonizing insecurity

On Monday, the mechanical engineering association VDMA therefore demanded clarity from the Chancellery: “We expect the Chancellor to rule out a lockdown in no uncertain terms,” ​​said VDMA General Manager Thilo Brodtmann. “It would have a devastating effect on the economy.” Two weeks ago, the Federation of German Industry had already expressed itself accordingly.

The industry did not have to close its doors in the spring – unlike in countries like Italy and Spain. However, many companies were still unable to work as usual because their employees had to look after their children at home because of the closed schools and daycare centers. In addition, the borders hastily closed by the governments meant that important components were stuck in China or Italy, for example. And Germany’s industry was also troubled by the abrupt drop in demand. When car dealerships and registration offices are closed all over the world, who will buy a new car? Especially if he doesn’t know how long he’ll have his job and his income?

A study by the International Monetary Fund (IMF) has been cited many times among economists in recent weeks, according to which a swift lockdown is ultimately better for the economy than the agonizing uncertainty of how things will continue. China is often cited as a role model in this regard, as it is the only industrial nation in the world that is expected to experience economic growth of almost 2 percent this year. For comparison: For the global economy as a whole, the IMF predicts a decline of 4.4 percent, for Europe even 7.6 percent.

However, China has also largely cut itself off from the outside world, benefiting from its 1.4 billion people-sized domestic market. In Europe, with its – still – open borders, the infection rate is likely to increase again quickly after a lockdown. The alternative would be to keep public life and thus also the economy on the back burner until next spring. But even the lockdown proponents don’t want to go that far at the moment.