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Europe’s largest economy has shown positive symptoms of pandemic recovery, but optimism is on the calendar for 2021.
This week, the German government cut its forecast for fiscal earnings for next year and pledged to borrow more in 2021, while Finance Minister Olaf Scholz told Reuters the economy would return to pre-crisis levels. until early 2022.
The Ministry of Finance said Thursday (September 10) that it expected an overall tax gain of 772. 9 billion euros (716 billion pounds, $916 billion) in 2021, 20 billion euros less than its previous estimate.
“We cannot save ourselves from the crisis,” Finance Minister Olaf Scholz said, noting that the fall in tax collection was related to government stimulus spending, but added that there are “many symptoms that the worst is us. “
His comments echo those of Economy Minister Peter Altmaier, who said last week that “compared to many other European trading countries Array . . . think of Britain, where the recession was twice as severe as in Germany. . . we have been able to maintain the substance of our economy and jobs.
READ ALSO: Germany forecasts GDP by 2020 better than expected
German GDP rose to 9. 7% at the time of the 2020 quarter, compared to the same time in 2019 However, the government recently revised its forecast for 2020 to a fall of 5. 8%, a more positive outlook than the previous forecast for a 6. 3% contraction. .
The most recent revision puts GDP in 2020 at almost the same point as the contraction of 5. 7% of GDP in 2009, at the height of the currency crisis.
“The recession in the first part of the year was less severe than we feared,” Altmaier said. Post-lock recovery goes “faster and more dynamic than we dared to expect,” he added.
However, Berlin is more pessimistic compared to 2021, forecasting an expansion of 4. 4%, below its past expectations of 5. 2%.
Manufacturing production was higher for the third consecutive month in July, with 1. 2% emerging than in May and June.
“Improving business temperament and reducing execution time recommend that the recovery procedure continue in the coming months, possibly taking some time,” the Federal Ministry of Economy said.
The sector in distress
The automotive sector experienced a 7% increase in production in July, but remains 15% below its pre-pandemic level. The German Economic Institute has warned that the automotive industry is the engine of expansion of the German economy in its current state of distress.
While the government has allocated billions of dollars to the automotive industry, which employs some 900,000 people, this is aimed at technology, the transition to green mobility, and electric car premiums.
READ ALSO: German car bosses call for more amid COVID-19 crisis
To the dismay of automotive leaders, who are struggling with overcame capacity and concerned about seeing an upward call, Berlin has not agreed to finance the acquisition of premiums for gasoline and diesel cars.
Politicians and industry organizations warn of mass layoffs in the automotive sector. Even before the pandemic, the automotive industry suffered and expected task cuts as a component of comprehensive cost-cutting plans. On Friday, Volkswagen-controlled truck manufacturer MAN said it would cut up to 9,500 tasks.
Audi (NSU. DE) plans to eliminate 9,500 jobs in Germany by 2025, while rival Daimler (DAI. DE) announced in November 2019 that it would cut some 10,000 jobs internationally until 2025 as a component of its cost reduction strategy. . DE) also plans to eliminate some 6,000 jobs.
At most of its EU neighbours, the country is also experiencing a momentary wave of COVID-19 cases: the death toll of around 9,300 is particularly lower than that of Spain, France, Italy and the United Kingdom.
While a repeat national lockdown is highly unlikely, a momentary outbreak of infections has fueled considerations about the damage that potential small or local locks or a lack of customer trust would cause to your business at this time of year.
Borrow to cushion the blow
Meanwhile, the German government is spending billions to reduce the effect of the pandemic on its businesses and staff. around 218 billion euros this year: Scholz said this week that the government will also have to take on more debt by 2021.
A key detail of Germany’s effort is the short-term painting program “Kurzarbeit”, which will now run until the end of 2021. The program has been recognized for helping Germany out of the currency crisis by avoiding mass layoffs and helping businesses grow once the economy improves.
The Ifo Institute said the number of companies still dependent on the licensing program fell to 37% in August, up from 42% in July. However, the commercial sector remains heavily dependent on the regime, with 80% of steel manufacturers still unemployed and 65% of automotive corporations.
The workplace in Germany saw a slight increase in the unemployment rate in August, to 6. 4%, up from 6. 3% last month, but noted that unemployment generally increased in August and that accumulation was not similar to the coronavirus pandemic. .