Financial institutions Allianz and Euler Hermes estimated that the strong economic downturn in the first half of 2020 could put at risk even 12 million jobs in Germany. The extent of the deterioration in the labor market is closely related to the duration of the restrictions.
Using the experience of China, in a basic scenario, economists of Allianz and Euler Hermes prepared a model of economic shock, with a full blockade of one month, as well as two months, as well as assuming that the implemented measures limiting the spread of a pandemic will prove to be a success. Still, even in the baseline scenario, the German economy is likely to shrink by 1.8 percent if it is stopped for one month and by 5 percent if the break lasts two months. Even in the case of such a relatively short standstill, the unemployment rate will see its first clear increase since the beginning of the 2000s, breaking at least temporarily at 6 percent.
There is a high risk of the situation getting worse. A prolonged health crisis with possible re-infections cannot be excluded. This would mean that the borders would remain closed and that transitional measures would limit the spread of the epidemic. The longer the break in the economy, the more difficult it is to restart the growth engine and the greater the likelihood of rapid deterioration. In this scenario, the German GDP will decrease by 7 percent.