Despite corona lockdown: BayernLB's chief economist expects a quick recovery

Germany is facing a second lockdown.

Jürgen Michels, chief economist at Bayerische Landesbank, believes that the economy will recover next spring as likely.

And even the stock exchanges could soon pick up again.

Mr Michels, the German economy has to cope with a second lockdown.

What are the consequences?

There are two consequences: one is the very immediate consequences, for example for the catering or tourism industry.

There will be severe slumps.

And the second episode?

There is now a great deal of uncertainty.

You now have to see whether people are reluctant to consume or whether they say: OK, this is now the second wave, but that doesn't mean we have to restrict our consumption right away.

The uncertainty is also so great because nobody knows whether the restrictions will really be lifted at the end of November.

How are the differences between the first and the second lockdown to be assessed economically?

With the first everything was closed - including schools and production facilities.

That is not the case now.

Therefore, we will get through the second lockdown with fewer wounds in terms of economic effects.

Large parts of industry and the service sector do not go back to near zero.

Did you now have to revise your economic forecast for the fourth quarter downwards?

What is clear is that we will see a pause in the economic recovery in the fourth quarter.

However, it is currently difficult to estimate this in numbers.

Presumably, the already low growth in the fourth quarter is now likely to be half a percentage point lower.

As a reminder: after the lockdown in the spring, the economy collapsed by almost ten percent in the second quarter compared to the previous quarter.

That means, not only in terms of the restrictions of the population, but also economically is the second lockdown a light variant?

Definitely, yes.

It is very important that schools and daycare centers remain open.

It's not just about ensuring that children and young people continue to receive a good education, but also that mom and dad don't have to look after the children but can continue to work.

This means that production can continue unhindered both in industry and in the service sector.

What's next in the coming year?

In the spring, when one can go outside again and hopefully there is clarity about a vaccine, a lot of consumer spending should be made up.

Despite the higher VAT, which should be back at 19 percent in 2021?

The higher sales tax will certainly be a damper in the early months of the new year.

Because anyone who has wanted to replace the old washing machine for a long time will do so before the end of the year.

There will be such pull-forward effects.

In the spring, however, that will subside, consumption will pick up and the recovery course will continue.

That sounds - with all the drama for individual industries - on the whole, confident.

Nevertheless, the Dax has made a strong setback this week and has rushed into the depths.

How does that fit together?

There is now another great uncertainty in the market.

It is conceivable that - contrary to our current expectations - the economy will go down again sharply.

And that is reflected in the stock exchange prices.

Are prices continuing to plummet?

It is quite possible that it will go further down in the short term.

However, since we continue to expect an economic recovery in the coming year, prices should rise again in the long term.

In view of the low interest rates, there will only be returns in future with riskier investments such as stocks.

China is already back on the road to recovery and is reporting growth.

Are democracies having a harder time fighting pandemics?

You always have to be careful with numbers from China.

But of course a dictatorial regime can implement measures more quickly.

If we look to democratic Asian countries such as Taiwan, for example, we can also see there that the pandemic can be successfully contained.

In France, on the other hand, the number of infections has risen dramatically, the country is facing a harder lockdown than Germany.

What does that mean for the economy in the euro zone if another heavyweight weakens?

Here you have to see the differences between the countries.

So far, Germany has come through the crisis relatively well.

On the one hand, because there were larger aid packages in Germany than in France, for example.

In addition, industries like tourism are by no means as important in Germany as in many other European countries.

With our industry-heavy economic structure, we are better positioned than other countries in the pandemic - Europe is also benefiting from this.

Do you still see a political failure in Germany?

You had a summer to prepare for the second wave of the pandemic.

From an economic point of view, could there have been better solutions than a second lockdown?

Yes, a disappointment is definitely to be seen.

There were many warning signs, none of this came as a surprise as it did in spring.

It is astonishing that the health authorities, but also the hospitals, no longer have taken precautions to deal with the increasing number of infections.

You had half a year and relatively little happened.

Apparently, forecasts are not enough for politicians to make decisions.

Obviously, that only works when the number of infections increases again.