WHU General

The Recession Will Be More Severe than Expected!

Professor Michael Frenkel and Haiko Stefan investigate the effects of COVID-19 on the German economy.

In a new study, Professor Dr. Michael Frenkel and Haiko Stefan examine the effects of the COVID-19 pandemic and the economic decline expected in Germany in 2020. They conclude that, in 2020, there will be a much stronger recession in Germany than previously assumed - e.g. by the German Council of Economic Experts. The researchers assume that the economic crisis will not be over before the medical crisis ends. The latter will probably not be the case until an appropriate part of the population has been vaccinated.

In order to investigate the effects of the economic slump on the German gross domestic product in 2020, Professor Frenkel and Haiko Stefan examined the capacity utilization of individual areas of the German economy. They show that, during the shutdown, the German economy only produces about 65 percent of the volume it did before the outbreak of the pandemic.

The magnitude of the economic slump that will occur in 2020 depends on the point in time at which parts of the shutdown will be withdrawn significantly and on how long it will take the economy to return to the structures that existed before the pandemic. To this end, the scientists are preparing various scenarios. As a result, they stress that the shutdown will only remain in the single-digit percentage range if extremely optimistic assumptions are made about the end of the medical crisis. However, a double-digit percentage decline in German gross domestic product seems more realistic. Frenkel and Stefan add to this rather sobering news that the results indicate that, after the recession, the economy will recover relatively quickly.

Read the full study