The economic implications of the virus corona are increasingly debated. Recently, many countries are announcing or implementing certain measures that should help the economy cope with problems arising from supply chain disruptions, shortages of raw materials and semi-finished products, stalling in transport of goods, and a decline in traffic in many sectors due to quarantine or self-imposed measures to prevent the spread of the disease. The German economy faces potentially big problems, being the largest economy in the Eurozone and one of the largest exporters in the world.
The German parliament is currently debating a major economic assistance plan estimated at 750 billion euros. The plan provides for a budget deficit of 156 billion euros, as well as a stabilization fund of around 600 billion euros for corporate lending. However, in order for this plan to be implemented, changes to the fiscal rules enshrined in the Constitution back in 2009 are necessary, since in Germany there is a limit that the structural fiscal deficit cannot exceed 0.35% of GDP, and this rule for the federal state level has been strictly enforced since 2016.
The German government is forecasting a 5% drop in economic activity in 2020. Of course, the longer the isolation period that accompanies the disruption of normal economic activities, the stronger the impact on the economy. For this reason, some impact assessments on the German economy go as high as 20% of GDP, which would be an unprecedented recession, comparable only to major natural disasters or war devastation.
The seriousness of the situation is also indicated by the IFO (German Institute for Economic Research) indicator, which states the lowest value for describing business activities since the 2009 crisis. The index section that tracks the industry sector has been at its lowest level since 2009, with the largest drop ever recorded. At the same time, the services sector is even more affected, with the largest decline since data has been monitored since 2005, with the index value being currently the lowest. The IFO index currently stands at 86.1 points, up from 96 points in February.
The Business Climate Index is an assessment of the situation in the German business sector by the Munich Institute for Economic Research, which has been publishing this data since 1972. Since 2005, there is a monthly database with around 7,000 companies answering a questionnaire regarding the business climate, current business and future expectations for the next 6 months. The index is published in two ways: as an index with an initial value of January 2005 (100 points), and as a change from the value from the previous month.
Since 2018, services sector companies have been included in the survey (until then, the emphasis was on industry and construction), but the current index values are not the results of a change in methodology but reflect the current subjective expectations of the business sector. The lowest index value was recorded in March 2009, with 82.2 points, and the highest in December 2010, with 109.5 points.
Considering that the economy of Serbia is closely related to the economy of Germany, one can also expect a great impact of the situation in this country on the events in our country. Germany is the second largest trading partner of Serbia (after Italy), while a large number of German companies operating in our country employ tens of thousands of people, and from Germany a large share of total foreign investment comes to our country.
Let’s use the medical vocabulary: if the German economy starts coughing, the Serbian will get pneumonia. At the same time, we are still waiting for any measures by the Government of Serbia to help businesses survive the crisis caused by the virus corona, Talas reports.
