Almost all economic researchers are now predicting a decline in gross domestic product for 2020 in Germany and the other major EU countries. The International Monetary Fund expects the global economy to shrink at least as much as in the financial crisis of 2009 (source). The unusual aspect is that demand and supply are declining at the same rate. This combination is triggering a rapid economic downturn.
In its latest forecast for the overall year, the Kiel Institute for the World Economy (IfW Kiel) predicted a decline of 4.5 to 9.0 percent for Germany, provided that the situation returns to normal in the second half of the year. The Ifo Institute in Munich even warned that the economy could collapse by almost 21 percent in the worst case. In their spring forecasts, the institutes had previously assumed that growth would come to a standstill at minus 0.1 percent. In March alone, GDP is expected to slump by 18 percent. The forecasts predict that export and domestic economic activity will be equally affected. For the coming year, however, the institutes expect a significant upturn. Gross domestic product is then likely to increase by 7.2 to 10.9 percent, due, among other things, to catch-up effects.
The EU Commission is now expecting a decline in economic output for the current year comparable to the crisis year 2009. At that time, the economy had shrunk by 4.3 percent. In order to enable rapid measures to support the economy and companies, the EU has temporarily suspend the stability pact.
In the USA, the government and the House of Representatives reached an agreement on a $2 trillion aid package for citizens and businesses. It is the largest aid program in US history. It is intended to support smaller businesses in particular with loans and to save cities from collapsing (source).
The number of new infections in China has almost come to a standstill. How will production develop in the short term?
Production in China is already ramping up again and is currently at around 90 percent of pre-crisis levels. Whether there will be a further increase in the coming weeks depends less on the health situation in China than on the development of demand from Europe and North America.
What is the situation for other countries in Southeast Asia?
Taiwan and South Korea, two important industrial locations and trading partners, have been affected to different degrees, but both have the corona crisis under control. They are seeing the benefit of early, consistent measures for hazard prevention. While Taiwan reports comparatively few coronavirus infections in relation to the population size (169 in total), the number of new infections in South Korea has been declining significantly since the end of February and, by end of March, is already below 75 new infections per day (down from more than 800 at peak times). All other countries in the region are currently reporting fewer than 500 total infections (source).
What should freight forwarders in Europe prepare for?
Europe has become the global hotspot of the pandemic. Italy and Spain are the most affected countries. Almost all countries have already imposed comprehensive lockdowns. Many of them, including several in Eastern Europe, have closed their borders. Although the movement of goods is still permitted, adverse effects for freight forwarders are to be expected. For details, see the section "Land Transport."
How is the situation in the USA expected to develop?
After Europe, the USA is likely to become the next coronavirus hotspot. The number of cases is now rising exponentially. Air traffic between Europe and the USA is already restricted. We therefore expect similar restrictions on public life as in Europe, at least in urban centers. The city of New York and the state of California have already taken the first steps in this direction.