Pancession follows pandemic: the global economy faces a deep recession. ConMoto analyzes the studies of economy experts and politicians, adding specific insights from ongoing projects with our clients and including talks with top managers as well as entrepreneurs.
Whereas initially, virologists dominated the scene, economists do speak up more frequently now. Current studies show an economic downturn of five to eight percent. The costs in Germany are being estimated to sum up to 750 billion euros. Presumably 1.0 to 1.8 million jobs subjected to mandatory social insurance contributions will be lost. Additionally, we will have six million employees working short time.
Cutbacks affect sectors differently
Of course, the cutbacks are going to affect separate economy sectors quite differently. Pertaining to the German economy, we are speaking about 45 million employees and 33.4 million people subjected to mandatory social insurance contributions.
In Austria, the number of unemployed persons already increased by more than 50 percent. Within the next months, the number may rise to more than three or even four million unemployed people in Germany as well.
The sharp unemployment increase will affect mostly:
The manufacturing sector/industry (approx. eight million jobs),
The retail market (including automotive repair approx. six million jobs),
The hospitality sector (1.6 million jobs), and
Freelance technical and other economic services (5.5 million jobs).
Whereas other economic sectors are facing minor to no negative effects or even an upturn, the adverse impact applies to not more than 50 percent of the total number of employees.
According to a ConMoto survey in the hospitality sector, experts expect an insolvency rate of 25 to 30 percent of all businesses. Consequently, the reduction of bed capacity is going to result in price increases during the next year. Companies will react with significantly reduced travel activities, especially since video conferencing has proven its practicability. This is only one in many examples regarding the potential for change in this period of crisis.
For the business-oriented service sector, a decline of at least 12 percent is expected. Regarding the industry, the figures indicate ten to 15 percent on average – both calculated for the year 2020.
GDP and Industry Production in Germany 2020
The German Federal Minister of Economics and Technology Peter Altmaier has already prepared the general public and the economy for challenging times. He expects a decline of the gross domestic product (GDP) by at least 5.8 percent, reaching its low in the months April to August. In Germany, we have introduced strong measures to curb the spread of the corona virus.
One thing is for sure: social distancing is saving lives! Still, we have to keep in mind that the social market economy enables prosperity and secures liberal democracy as well as social peace. Germany has an internationally outstanding hospital infrastructure. We are being envied for our excellent social and public safety. These social and economic accomplishments have to be preserved during the crisis as well.
More than 50 percent of the employees are working in indirect areas. Prosperity, on the other hand, is created by sectors directly adding value – such as agriculture, industry, crafts, construction, broad sections of retail and the corresponding services. Less than 50 percent of all employees work in the sectors that are seriously suffering from the shutdown. In the interest of all, we need concepts and structures that enable a sustainable value creation. And ConMoto is responding.
Now, elementary issues like subsistence must have top priority! Is your company prepared?
How do you communicate with banks, clients, suppliers but also and foremost – with your employees?
What is your anticipated duration of the shutdown and what are your plans for the time after?
We have highly skilled consultants with many years of industry experience. Our colleagues are ready to support you with proven methods and programs as well as individual solutions specifically adapted to your situation.