Professor Wieland, how long can we keep going in this crisis mode?
It remains to be seen how long this will be necessary. But one thing is certain: the longer we keep the shutdown, the more serious the economic consequences will be for Germany. The burden increases disproportionately with the duration of the crisis.
Are many still underestimating the economic consequences of this terrible pandemic?
How this is perceived in public always seems to fluctuate between playing down and over-dramatizing. From the current perspective, I think horror scenarios with a 20 percent slump in the economy, such as those circulating, are exaggerated.
How bad do you think it will be?
We from the Council of Experts have worked out various scenarios in our special report. In the baseline scenario, with five weeks of standstill and then two weeks of recovery, we expect the economy to collapse in the second quarter roughly the same size as in the financial crisis in 2009 – and for the year expected gross domestic product to shrink by around 2.8 percent. If things get worse and we have a seven-week standstill with three to four weeks of recovery, the slump will be disproportionately stronger. The longer the standstill lasts, the more fundamental the changes in the economic structure become. If, for example, many companies do not survive the crisis, people cannot simply go back to work after the standstill and it changes a lot more in the country than we currently expect. This also makes the economic recovery process harder and longer.
In which industry is it particularly tight?
The areas of the service sector that are particularly badly affected include hotels and hospitality, the travel industry and aviation, but also entertainment and recreation. Overall, about 3.5 percent of the economy. In the meantime we are also hearing from more and more industrial companies like VW that there is a production stop. For these areas, it is particularly important how to proceed after the standstill. In the case of cars and washing machines, the missed items can be made up for in part by inquiring and producing a lot after the crisis. But restaurants, for example, only have a limited number of tables. If they stay empty now, that’s simply missed business that won’t come back. It might be possible to bridge the gap for two or three months, but it will be difficult with six months. It is also unclear in the travel industry whether the changes that are now emerging will simply disappear after the crisis. Perhaps companies will also discover that video conferencing can save some trips – and they will continue to do so even after the crisis. Then there would be fewer business trips after the crisis, the selective change would become a structural one. However, other companies such as streaming services are even benefiting from the crisis.