AN EYE ON GERMANY
The IMF expects Germany ’ s economic growth to pick up in 2021 as vaccines are more widely distributed , but output is not projected to return to its pre-crisis level before 2022 .
“ The expansion of short-time work benefits (“ Kurzarbeit ”) has played a vital role in preserving jobs , and supporting household income in Germany , during the pandemic .”
Germany entered the COVID-19 crisis with favourable economic conditions , supported by strong domestic demand on the back of record low unemployment and robust wage growth . Consecutive fiscal surpluses had brought public debt down to under 60 per cent of GDP . The current account surplus had narrowed slightly to 7.1 per cent in 2019 , and private balance sheets were strong , although large segments of the banking sector were struggling with persistently low profitability . “ The COVID-19 pandemic caused an unprecedented economic contraction of 11.5 per cent in the first half of 2020 , due to domestic containment measures and a sharp , synchronised global slowdown . Nonetheless , thanks to a successful initial public health response and strong macroeconomic policy support , the economy has proved more resilient than in many peers . The multi-pronged fiscal measures amount to more than 10 per cent of GDP over 2020-2021 and , together with the expansion of public guarantees , make up one of the largest fiscal packages in Europe ,” commented the International Monetary Fund ( IMF ).
The expansion of short-time work benefits (“ Kurzarbeit ”) played a vital role in preserving jobs and supporting household income .
Germany entered the COVID-19 crisis with favourable economic conditions , supported by strong domestic demand on the back of record low unemployment and robust wage growth
Looking to the future
IMF staff envisage a choppy economic recovery in Germany , unevenly distributed across sectors , and with quarterly swings conditioned by volatile infection dynamics throughout early 2021 .
“ The recovery should firm up once there is wide distribution of effective vaccines , but output is not expected to return to its pre-crisis level until 2022 . The baseline projection is subject to unusually large uncertainty , with risks tilted to the downside as resurgent infection waves may trigger renewed or prolonged lockdowns and deepen economic scarring . The country ’ s export dependence and financial openness also make it vulnerable to shocks to external demand . Over the medium term , longstanding challenges related to population ageing , infrastructure gaps and an impending green energy transition will be compounded by structural changes ushered in by the pandemic ,” said the IMF .