ECONOMIC IMPACT OF COVID-19 ON KEY COUNTRIES

GERMANY

The German Council of Economic Experts (GCEE), the advisory council of the German government, predicts that the country's GDP will shrink to minus 2.8 percent in 2020 due to the coronavirus pandemic. GCEE considers a normalization of the economic situation over the summer to be the most likely development. It also predicts that in 2021, catch-up effects and a large carry-over effect can drive GDP growth back to 3.7 percent. The Ifo Institute believes that the crisis will take full effect in the second quarter and lead to a 4.5-percentage-point fall in GDP. Production of goods and services will only gradually return to a normal leve by the first half of 2021. Excluding long-term effects like company bankruptcies, ifo is expecting the overall damage of the pandemic to German economy to be at a total of around 115 billion euros by 2021. Ifo warns that the pandemic, given its magnitude, will also have substantial effects on the labor market. The number of people in employment will fall for the first time in 15 years. Experts warn that the country's automobile industry will be significantly damaged by the coronavirus crisis in 2020 and beyond. And more than 100,000 jobs or 12 percent of the current 830,000 jobs at car manufacturers and suppliers could be at risk.

FRANCE

In France, four million employees, or one in five, are currently under the partial unemployment scheme put in place by the government in response to the coronavirus crisis. Under the scheme, employers pay their employees on temporary leave most of their salary. The state will then reimburse businesses in full for salaries up to 4.5 times the minimum wage. The French government has enabled expedited procedures for employers to facilitate partial unemployment. It is estimated that the mechanism to avoid dismissals might cost the French state coffer billions of euros. The national statistics institute Insee, expects that each month of confinement will cut economic growth by 12 percentage points on a quarterly basis and 3 percentage points on an annual basis. In its updated budget bill, the government expects GDP growth to be -2,2% and beyond in 2020.

ITALY

On average for 2020, GDP will drop 6%. The General Confederation of Italian Industry (Confindustria) indicates that industrial production in the first quarter of 2020 is expected to contract by 5.4 percent, the largest drop in the past 11 years. If the acute phase of the health emergency ends in May 2020 and production resumes gradually between the end of April and the end of June, gross domestic product (GDP) in Italy will fall by 10 percent in the first two quarters compared to the end of 2019. National GDP will likely drop by a further 0.75 percent" for every additional week that production is at a standstill due to the coronavirus pandemic.

SPAIN

In March, of Spain's population of 46.8 million, 303,365 people lost their jobs, with 3.55 million people now registered as unemployed. The Spanish economy is more sensitive to the effects of the crisis compared to other countries as it has a number of vulnerabilities: The economy slowed already in 2019 and was expected to slow further; it has a high unemployment rate (13.8%) and high government debt (close to 100% of GDP), a high structural deficit and a minority central government and regional tensions.

Tourism and travel account for 15% of Spain's GDP  and this sector is hard hit. SME’s are important and more vulnerable. They have limited financial, managerial and technological resources. This is why, for example, it is more difficult for small firms to respond to the crisis with technological solutions such as telework. Workers in the informal sector have no social protection and are more difficult to reach with targeted measures while self-employed workers generally have lower social protection too. 300,000 jobs could be lost if the crisis lasts over a month, especially in hotels, travel agencies and the textile sector. This is because nearly 30 percent of all workers have temporary contracts, the highest rate in Europe, especially in the key tourism sector.