EcoWeek

Covid19 kills economic activity in H1 2020

Eco week 20-11// 20 March 2020  
economic-research.bnpparibas.com  
3
ECONOMIC PULSE  
GERMANY: COVID19 KILLS ECONOMIC ACTIVITY IN H1 2020  
In the latest months, economic activity was virtually stagnant. As can Second, to improve their liquidity, businesses will be able to defer bil-  
be seen in the chart, the export-oriented manufacturing sector was lions of euros in tax payments. Third, existing liquidity programmes  
operating well below potential, whereas activity in the more on the will be broadened to give companies access to cheap loans, in partic-  
domestic market oriented sectors such as construction and services re- ular through the state development bank KfW. The government is still  
mained buoyant. The outbreak of the Covid19 in Germany has changed working on how these loans can be repaid once the pandemic ends  
the picture completely.  
without unduly weighing on the recovery. Programmes of export credits  
and other guarantees to help companies in crisis are to be expanded.  
In order to stop the spread of the virus, the economy has largely come  
to a standstill. To reduce public movement, non-essential shops had At this stage, it is very difficult to foresee when the epidemic will be  
to close and restaurants could only open for lunch. In addition, border contained and the economy could restart again. Based on what hap-  
controls were reintroduced with five countries. More drastic measures pened in China and Korea, we assume this to happen in Q3 2020.  
such as home confinement could be expected if citizens do not vol- However, as it takes some time before supply chains are fully restored,  
untarily limit interaction. In a television address, Angela Merkel, the the government might consider a modest fiscal stimulus programme in  
German chancellor, called the coronavirus epidemic the biggest chal- Q3 2020 in order to restore confidence. Moreover, the partial abolition  
lenge Germany has faced since the Second World War.  
of the solidarity tax may be brought forward to 1 July 2020. Both mea-  
sures would be welcome for kick-starting the economy.  
To support business and protect jobs, the government has unveiled  
an assistance programme and tax policy measures totalling billions  
of euros. The programme has three main pillars. First, access to the  
short-time work compensation scheme (Kurzarbeit) will be facilitated.  
In particular, eligibility requirements have been loosened. During the  
global financial crisis in 2008-10, the Federal Employment Agency paid  
almost EUR 10 billion in short-time work allowances.  
Raymond Van Der Putten  
QUARTERLY CHANGES  
3
-month moving average (actual) --- 3-month moving average (4 months ago)  
M3M (actual)  
Effective  
Exchange Rate  
M3M( 4 months ago)  
3
2
1
0
.0  
.0  
.0  
.0  
IFO Business Climate  
Manufacturing  
Unemployment Rate  
Core HICP  
Industrial Orders  
foreign  
-
-
-
1.0  
2.0  
3.0  
GFK Consumer  
Confidence  
Industrial  
Production  
New Orders  
Construction  
Retail sales  
IFO Business Climate  
Trade  
IFO Business Climate  
Construction  
IFO Business Climate  
Services  
SOURCE: THOMSON REUTERS, BNP PARIBAS  
The indicators in the radar are all transformed into z-scores. By construction, the z-scores have mean zero and their values, which indicate how  
far the indicator is removed from its long-term average, are in the interval between -3 and 3 in almost all cases. In the radar chart, the blue area  
shows the actual conditions of economic activity. It is compared with the situation four months earlier (dotted-line). An expansion of the blue area  
signals an improvement. In the right pane, the surprise is an actual outcome that differs from the market forecast (Bloomberg).  
The bank  
for a changing  
world  
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