Ifo index falls in January: second wave dampens economic outlook

Monday, January 25, 2021

Ifo index falls in January
Second wave clouded economic outlook

All hopes for a quick economic recovery are gone. Many company bosses expect worse business deals. The industry also fears corona-related company closings. Ifo boss Fuest appeals to the government to prevent the company from going out of business.

The mood among companies in Germany worsened at the start of the year. The Ifo business climate index fell in January to 90.1 points from 92.2 points in the previous month, as the Munich economic research institute announced. Around 9,000 managers took part in the survey. "The second corona wave temporarily ended the recovery of the German economy," said Ifo President Clemens Fuest. The managers judged the outlook for their businesses and their situation to be less favorable than recently.

Ifo boss Clemens Fuest warns against closing industrial companies.

(Photo: dpa)

Due to the corona pandemic, the German economy collapsed by five percent in 2020 as it had not since the financial crisis and at the same time shrank for the first time in eleven years. Economists believe that the economy will again see a noticeable improvement in the current year, but this depends heavily on the further course of the pandemic and the success of the vaccinations. So far, the federal government has officially expected growth of 4.4 percent for 2021, but according to Reuters information it should lower its forecast to three percent in the new annual economic report on Wednesday.

In view of the tense situation, Fuest warned against the closure of industrial plants. "It would be madness to shut down the industry now," he says on ZDF. You shouldn't do that under any circumstances. "We have to keep the industry open, we cannot afford an economic collapse." It would have to be possible to continue to be able to provide aid for the closed areas. "Where else is that supposed to come from?" Asked Fuest.

Fuest considers bankruptcy to be avoidable

Many entrepreneurs have been waiting for weeks for the so-called November aid to be paid out. The federal government actually wanted to give companies a quick helping hand: the applicants should receive up to 75 percent of the previous year's turnover. A December aid program was also launched. It is not a condition that much of the federal government's announced aid from last year has not yet been paid out, said Fuest. But he also defended the authorities, who were facing a lot in this pandemic. "It's a stressful situation, so it's not surprising that it's going slowly."

The corona crisis does not necessarily have to lead to a wave of bankruptcies. The industries affected are limited. "Of course there will be more bankruptcies," said Fuest. "But we can get through this pandemic without a massive wave of bankruptcies if we do it right."