_ 205
Germany The German economy is facing a deep recession, with a decrease in GDP by 8.8% in 2020 if a second COVID-19 outbreak requires further containment measures or prolongs uncertainty. The fall in GDP is estimated at 6.6% if the virus subsides by the summer. Containment measures have been shorter and less stringent than in other major European economies, thanks to widespread testing and high health sector capacity. This has moderated the economic downturn, but uncertainty and reduced demand are still having a significant effect on business investment and exports in key sectors, in particular manufacturing. A second outbreak would undermine the benefits of an early and well-managed reopening. Increased uncertainty would underpin greater precautionary saving by consumers and weigh on investment at home and abroad, with negative consequences for Germany’s capital goods exports. Strong fiscal measures have reinforced health system capacity while protecting jobs and firms, including through guarantees and equity injections to safeguard liquidity and solvency. The scale of the challenge some firms are facing means that speedy resolution of insolvency will also be important and the high costs of firm failure should be reduced as planned. A short-time work scheme is protecting existing employment relationships for those with jobs. The cost of future lockdowns could be reduced by accelerating the digital transformation by enhancing digital government services and supporting infrastructure deployment, adoption of digital tools by small firms, and skills development. The health system has proved resilient Germany has confirmed a large number of COVID-19 cases, principally in the most populous western states. Diagnostic testing capacity was developed and employed quickly. Entering the pandemic, Germany had the highest number of intensive care beds among 22 OECD countries for which recent data are available, with the vast majority of those beds having ventilators. Widespread testing, high health sector capacity and the relatively young average age of those contracting the virus contributed to Germany recording one of the lowest death rates in Europe.
Germany 1 Another virus outbreak would slow the recovery Index 2019Q4 = 100, s.a. 110
Economic activity indicators have collapsed
Real GDP
Index 2015 = 100, s.a. 110
Single-hit scenario
105
Double-hit scenario
Diffusion index, s.a. 70
105
60
100 100
50
95
95
90
40
90
85
30
80
85 80 75
20
← ifo business climate
75
Markit PMI composite →
10
70 2019
2020
2021
0
65
2015
2016
2017
2018
2019
0 2020
Source: OECD Economic Outlook 107 database; ifo business surveys; Markit. StatLink 2 https://doi.org/10.1787/888934139385
OECD ECONOMIC OUTLOOK VOLUME 2020 ISSUE 1: PRELIMINARY VERSION © OECD 2020