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Global Economy

A fiasco for the economy?

It's a simulation, not a forecast: Let's assume that the zero-Covid strategy in China no longer works at Omikron. Then the highly contagious virus variant hits a population that has hardly come into contact with the virus so far. Michael Böhmer, chief economist at the economic research institute Prognos, describes the initial situation:

Economic growth could drop significantly

In the Prognos study, it is assumed that Omikron will hit the economy in China as hard as the alpha variant at the beginning of the pandemic. "If we accept that, we would no longer have growth of six percent in China in 2022, but only 2.3 percent," says Böhmer.

Effects on the German economy

In the scenario, Prognos also calculated the extent to which this could affect the German economy in figures. This is not a prediction. Instead, assumptions are made in the simulation. In this case, it is assumed that industrial production in Germany will not grow at all in 2022. Because of the delivery bottlenecks. Because many companies in Germany need material from China for further processing.

"If you take all of this together, we would come to the conclusion that the growth prospects for Germany would roughly halve," says Böhmer. "No longer four percent, which we actually assume for this year, but only 2.1 percent."

Effective vaccine needed

If Omicron continues to spread in China, the People's Republic will respond with tough measures. That's not just Prognos' assumption. Andreas Glunz from the board of directors of the international business of the management consultancy KPMG also sees it this way:

Many German companies affected by lockdowns

In the fourth quarter of 2021, the Chinese economy grew more slowly than in the rest of the year – also because there were several lockdowns in December. More than 100 German companies were recently affected by lockdowns in the economic centers of Xi'an and Tianjin in the north of the country. Production was partially stopped.

"The disruptions that have been there throughout the year, including through logistics – supply chains, lack of raw materials – are simply intensified by such lockdowns," says Jens Hildebrandt from the German Chamber of Commerce Abroad in China. "Thus, the economic activity of the companies is restricted. Basically, one has to say that the arrival of Omikron will be a test by fire for China. One has to see how well the zero-Covid strategy that the Chinese government has pursued so far will hold up. "

Infection rates in Hong Kong are increasing

There are currently isolated lockdowns in China after omicron outbreaks. Nevertheless, the zero-Covid strategy in mainland China seems to be working so far. The number of cases reported daily in the state media is in the double digits.

The situation is different in the Hong Kong Special Administrative Region. Hong Kong's administration is based on mainland China in its fight against the pandemic – but the number of cases in Hong Kong has recently risen rapidly due to the omicron variant – to more than 2000 new infections reported a day.

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