ZEW Economist Friedrich Heinemann on the German GDP in 2Q20

In the second quarter of 2020, the German economy experienced the sharpest drop in its economic output ever recorded by the German Federal Statistical Office in Wiesbaden since it started its quarterly calculations in 1970. In comparison to the previous quarter, the already low gross domestic product (price, seasonally and calendar adjusted) fell by 10.1 per cent. When compared to the second quarter of 2019, this represents a decrease of 11.7 per cent. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim, comments on this matter.

“The calculations of the Federal Statistical Office confirmed what everyone already knew. The downturn that the Federal Republic is currently experiencing is by far the deepest recession in its history. There is, however, no reason to panic over these seemingly alarming figures. By providing liquidity assistance and adopting the stimulus package in June 2020, economic and financial policymakers reacted both sensibly and appropriately, and adopted successful measures to contain losses. The increase in public debt is high, but it remains on a sustainable level. It is, however, clear that the downturn caused by the coronavirus recession is more than a mere cyclical crisis. The ongoing pandemic will accelerate the structural change towards the digital economy. After those successful stimulus measures, policymakers and German society must now by all means avoid the mistake of preserving the status quo from before pre-coronavirus times through permanent subsidies.”