Corona crisis: Bundesbank warns of “slipping into a pronounced recession”

Corona crisis: Bundesbank warns of "slipping into a pronounced recession"

In the corona crisis, the Bundesbank does not expect a pronounced slump in the economy to be prevented. The measures to contain the infection numbers would have massive economic effects, it is said in the current monthly report the central bank. “It is unavoidable to slide into a pronounced recession.” An economic recovery would only start when the pandemic risk was effectively contained.

“The effects of the pandemic are expected to have a massive impact on economic performance at least in the first half of the year,” the Bundesbankers write in the report. Domestic-oriented, consumer-related services, which have so far supported the economy, are most affected. The central bank includes the hospitality industry, the entertainment sector, but also trade fair companies and aviation companies. (Read more about the winners and losers of the crisis here.)

Falling demand and delivery difficulties

In addition, there would also be possible loss of work and sales due to protective and precautionary measures at other companies. In addition, demand for German exports in the countries particularly affected by the pandemic is likely to decrease significantly.

Because of the reduced production in these countries, the Bundesbank is threatening delivery bottlenecks for important primary products. This could also lead to bottlenecks among manufacturers in Germany, even if demand is still there.

The Munich Ifo Institute also expects the corona crisis to have significant consequences for the German economy – specifically, it predicts a decline in economic output of 7.2 to 20.6 percentage points. That would correspond to costs of 255 to 729 billion euros.

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