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Corona: Economic impact unfairly distributed - gross domestic product falls

Corona: Economic impact unfairly distributed - gross domestic product falls



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Corona pandemic: what economic effects can be expected?

The corona crisis has far-reaching consequences for the global and thus also for the German economy. Recently released figures from Eurostat show that the gross domestic product (GDP) in Germany fell by 2.4 percent in the first quarter of 2020, although the consequences of the corona pandemic only came fully to bear in the second half of March. A double-digit decline is in the offing for the second quarter.

The Kiel Institute for the World Economy (IfW Kiel) announces a 2.4 percent drop in German GDP in the first quarter of 2020. This is the strongest drop since the financial crisis in 2007 and 2008. In a European comparison, the decline is even moderate. An even clearer decline is expected in the second quarter.

Germany got off mildly in European comparison

According to the IfW Kiel, Germany is still relatively good with the decline. In France, GDP fell by 5.8 percent, in Italy by 4.7 percent, in Spain by 5.2 percent, in Belgium by 3.9 percent and in Austria by 2.5 percent. However, the full extent is only expected in the second quarter.

There has never been so much short-time work

"The Corona crisis hit the German job market with full force, never before since reunification have more people registered as unemployed from one month to the next. The companies have also reported short-time work for over 10 million employees, the number of short-time workers will certainly reach a level never seen before, ”summarizes Dominik Groll, lead analysis of the labor market at IfW Kiel.

Load is unfairly distributed

IfW Kiel President Gabriel Felbermayr considers the economic burden resulting from the fight against the corona virus to be unfairly distributed. For example, some sectors of the economy, such as tourism and gastronomy, are overly affected by the measures. The resulting effects to contain the coronavirus SARS-CoV-2 would benefit society as a whole.

Particularly hard-hit companies would over-indebtedly emerge from the crisis, which in turn would hamper the growth and recovery of these companies. Therefore, according to Felbermayr, the fair compensation of the burdens should become the yardstick for economic policy in addition to the limitation of damage. "If there is no burden-sharing, the equity of many companies will be severely attacked, which could prove to be a heavy mortgage for an upswing after the crisis," Felbermayr warns in a press release from the economic institute.

A lack of sales, credit programs, grants and short-time working arrangements could save many companies, but at the same time the company's debt would increase. "If the companies now knew that they would not end up sitting alone on the loads, they could plan for the future with more confidence and with greater certainty," emphasizes Felbermayr. This is the only way for the liquidity aid that has already been decided to be fully effective.

Proposal for a fairer load sharing

The Kiel Institute for the World Economy therefore proposes a burden-sharing scheme in which the state pays a certain share of the loss of income for certain industries. The annual income from 2019 could serve as a basis. Corona help already received could be counted towards the load balancing. This will keep the incentive to do better.

The additional costs incurred in this way could then be recovered in the following years using certain criteria using the tax. This means that the load is not shared among a few, but equally among all. (vb)

Author and source information

This text corresponds to the specifications of the medical literature, medical guidelines and current studies and has been checked by medical doctors.

Graduate editor (FH) Volker Blasek

Swell:

  • Kiel Institute for the World Economy (IfW Kiel): Corona: German GDP drops by 2.4 percent in Q1 (published: April 30, 2020), ifw-kiel.de
  • Kiel Institute for the World Economy (IfW Kiel): Record rise in unemployment in April exaggerates true extent (published: April 30, 2020), ifw-kiel.de
  • Kiel Institute for the World Economy (IfW Kiel): Felbermayr: Corona burdens are unfairly distributed, compensation necessary (published: April 22, 2020), ifw-kiel.de



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