Virus second wave douses hopes of German economic recovery

BERLIN (AFP) – Germany unveiled a strong rebound in gross domestic product (GDP) for the third quarter yesterday, but relief could be short-lived as the country stands on the brink of new shutdowns to contain a second coronavirus wave.

Analysts from financial information service Factset have predicted a rebound of 7.4 per cent in July to September after a plunge of almost 10 per cent during the second quarter (Q2).

Indicators for production, industrial orders and exports all saw an uptick in Europe’s biggest economy during the summer months, thanks to a loosening of restrictions as the number of coronavirus cases dropped.

But Germany, like the rest of the continent, has in recent weeks been engulfed by a second wave of the pandemic, with European Central Bank (ECB) Chief Christine Lagarde noting that recovery in the single currency zone was “losing momentum more rapidly than expected”.

Germany’s cultural, leisure, as well as food and drink sectors have been ordered to close from Monday to the end of November, in a new round of shutdowns that industries have warned could lead to a raft of bankruptcies.

Confidence has already been in decline since early October among entrepreneurs, investors and consumers.

And now “the recovery is on hold,” analyst for ING bank Carsten Brzeski told AFP.

Having been praised for its handling of the first wave of the pandemic in the spring, Germany is now regularly reporting more than 10,000 new cases a day and saw a peak of 16,774 on Thursday.

An employee of Wolt food delivery service puts food in his delivery case at a restaurant in Berlin. PHOTO: AFP

Tough restrictions to come in force on Monday will keep restaurants closed. Hotel stays will be allowed only for “necessary and expressly non-tourism purposes”. Schools, daycare centres and shops will remain open, however.

It is safe to assume this “will also have an influence on economic developments”, Economy Minister Peter Altmaier told parliament on Wednesday. According to the LBBW bank, the measures could eat into GDP by 0.5 percentage points in 2020 and one point in 2021.

Fears of a rise in unemployment are also growing, despite an encouraging figure of 6.2 per cent for October.

The KfW public investment bank has predicted that more than a million jobs could be lost this year in small- and medium-sized enterprises.

Many blue-chip German businesses have also announced sweeping job cuts, including 30,000 at flagship airline Lufthansa, 8,000 at tour operator TUI and 6,000 at carmaker BMW.

In the hospitality sector, professional associations are warning that up to a third of hotels and restaurants could be forced to close their doors for good by the end of the year.

Protesters from some of the worst-affected industries staged a demonstration in Berlin
on Wednesday.

“Over the last eight months, our turnover has plunged between 90 and 100 per cent,” said Cordula Weidenbach, whose company rents out furniture for trade fairs in Munich.

“If this continues, we will go bankrupt.”

Berlin announced on Wednesday that it will offer an extra EUR10 billion (USD12 billion) in aid for businesses affected by the November shutdown.

Companies will be compensated for up to 75 per cent of their turnover during the weeks they are forced to close, whereas previous aid could only be used to cover fixed costs such as rent and utility bills.

The government has also already extended its “Kurzarbeit” short-time working scheme for a total of 24 months.

But the restrictions remain a bitter pill to swallow for some. “We know that hotels are not places prone to infection,” Sandra Warten of the DEHOGA hotel and catering union
told AFP.

“We are taking these measures in November so that the next few months will be easier,” Finance Minister Olaf Scholz insisted in an interview with the ZDF broadcaster.