Germany’s post-Merkel and post-Covid economy is taking shape

What will the post-Merkel German economy look like? She will be more in debt, less productive and arguably less self-confident than before. This is the message delivered, Thursday, April 15, by the major German economic institutes, on the occasion of their joint growth forecasts. In the short term, once the current restrictive measures are lifted, the economic recovery should be sustained, they anticipate. The largest economy in the euro zone is expected to grow by 3.7% in 2021 and 3.9% in 2022, economists anticipate. They are especially alarmed by the conditions for resuming growth in the medium term: for Angela Merkel’s successor, the challenges ahead will be considerable.

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The cause of the current uncertainty is obviously linked to the pandemic which is continuing in Europe. Germany is going through its third wave of contamination, which has imposed tightening of restrictions and “emergency brakes”, total targeted closures, in the event of certain thresholds being exceeded. So many measures that deal a further blow to consumption. Over the past twelve months, German economic activity has been marked by strong variations in activity: the general halt in production and services last spring was followed by a strong recovery in summer 2020 , interrupted again by the second wave of infections in late fall. In view of the rapid increase in ongoing infections, economists expect the country’s economic life to normalize at the end of the second quarter of 2021 only.

Stabilizing factor

But not all sectors are affected in the same way. The German export industry is currently the main stabilizing factor in the economy. Production, which has adapted to the health situation, is little affected by the restrictive measures and is benefiting from the strong recovery in Asian countries. Currently gathered at the Hanover Fair, which is being held this year in virtual format, manufacturers have shown their optimism. They expect production to increase by 8% this year. Order books have already returned to their pre-crisis levels, thanks to the strength of exports and the global recovery.

Economists favor the scenario of a festive summer, which will offset consumption for so long constrained

Services and trade are paying the heaviest price for the pandemic. The progress of the immunization campaign, which underwent a strong acceleration after Easter, rekindles business hope. 740,000 vaccines were administered Wednesday April 14, a record. As the government has managed to maintain the purchasing power of the population and limit bankruptcies, the lifting of restrictions should mark a strong upturn in activity.

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