Home Germany: Additional containment measures plus fantastic fiscal firepower – Rabobank
FXStreet News

Germany: Additional containment measures plus fantastic fiscal firepower – Rabobank

Germany enters a hard holiday shuttering on Wednesday, December 16 until 10 January. The closure of non-essential shops in the final weeks of the year could cost EUR3.5 B in lost total value-added. For January, the estimate is similar. Meanwhile, Germany has adapted its 2021 budget. It has been expanded to facilitate extended support, given that current restrictions could last until Spring, per Rabobank.

See – EUR/USD Forecast: Vaccine hope or lockdown gloom? US fiscal stimulus key to smashing double-top

Key quotes

“In a bid to contain a further rise in the number of infections, Germany will go into a hard lockdown from Wednesday, December 16. In addition to the measures already in place, schools and non-essential shops will now be closed as well. This results in containment measures very similar to those late March, early April.”

“The three largest sectors affected by the new measures are wholesale trade, retail trade and the automotive sector. In order to get a ballpark estimate, we look at the impact in April, where during the first two weeks non-essential shops were closed as well. A simple calculation shows that these measures could cost as much as EUR 3.5 B in lost value-added.”

“We had already pencilled in a contraction of 1.8% of GDP in the fourth quarter, including a contraction in retail, wholesale and motor vehicle sales. These additional measures put extra pressure on GDP however. The contraction in 2020 will consequently be larger whilst the recovery in 2021 will be weaker than in our current forecast, where we have pencilled in a contraction of 5.8% for 2020 and a growth of 3.0% in 2021.”

“The German government has recently adapted its budget for 2021. The budget for 2021 anticipates that restrictions could last until Spring. Consequently, the budget is EUR43 B larger (1.3% of 2019 GDP) than previously envisaged. From 2022 onwards, the budget will return to pre-COVID levels.”

 

FX Street

FX Street

FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions.