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Global Economy

First easing, then upswing?

For the German economy, which has suffered significantly from the restrictions, the opening steps are of course good news. However, the economy will not suddenly pick up again, says Stefan Kooths, Vice President of the Kiel Institute for the World Economy. "What is still troubling us at the moment are the burdens in the service sector, also due to quarantine measures," explains the economist. "Will we have to complain about lost work in other parts of the economy? All of that is not suddenly off the table."

Upswing by mid-March at the latest?

Kooths is certain that the economy will take off as soon as the last infection protection measures are lifted. Another reason for this is the enormous sums of money that private households were forced to save during the pandemic. The Institute for the World Economy speaks of pent-up purchasing power of 215 billion euros. But will the Germans, who are considered world champions in saving, really spend all of it?

"We assume that about ten percent of what was not spent during the pandemic will gradually flow back into consumption," predicts Kooths. "And the normalization of consumer behavior alone has a strong stimulating effect on the economy."

According to capital market expert Stefan Risse from Acatis Investment, the travel industry and the gastronomy sector in particular will benefit from the increasing mood to buy. For a so-called Corona winner, on the other hand, the tide is turning: "You hear from the online retailers, who have experienced an incredible boom, that demand has dropped sharply," says Risse. "Even in the Christmas business – especially since then – it's pretty much dead. People have apparently stocked up in many places."

"We're not talking about peanuts here"

The Institute for the World Economy expects that the German economy will have reached its pre-crisis level again in the second quarter – if there is no further setback, for example due to a new corona variant. What then remained were enormous losses over the two-year pandemic. According to the Munich ifo Institute, Corona has cost the German economy 330 billion euros. The Institute for the World Economy even assumes 340 billion euros. "We're not talking about peanuts here," said Vice President Kooths. "That's ten percent of the economic management that we had before the pandemic. That was quite a blow to the office."

A blow that could also have serious consequences for private households in the long term. Because of the billions in aid for distressed companies and the short-time work allowance, the state has become heavily indebted. And sooner or later this debt could return to the population in the form of higher taxes or fewer benefits.

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