QII-2020 QUARTERLY REPORT GERMANY
Strong signals in tough times Economic stimulus package to ward off deep recession
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The federal government’s economic stimulus package sends a strong signal to its citizens and businesses. The package will stabilise economic output before the end of the year.
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Economic output is set to drop by 6.5 percent in real terms. A full recovery cannot be expected until well into 2022.
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The coronavirus crisis is hitting the economy with full force. German exports are set to shrink by around 15 percent this year and imports by around twelve percent. The BDI expects investment in plant and equipment to tumble 20 percent. We expect private consumption to shrink by around seven percent.
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Additional support measures must stay on the political agenda. The right incentives to kick-start consumption and investment are in place, but there is not enough scope for offsetting losses. The legislator must adopt further measures in the course of the year to secure liquidity and reduce the risk of insolvencies.
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Ten-year growth package and corporate tax reform required. To effectively counter the period of weak global economic demand, investment activity and foreign trade that will last for several years to come, Germany needs to adopt a ten-year investment package with a volume of around one to 1.5 percent of its annual economic output. Structural reform and a lower corporate tax rate of 25 percent are further necessary steps.