Prospects of recovery remain intact

The chief economists of the Savings Banks Finance Group are cautiously optimistic about the economic trends in Germany and Europe. The lockdown is still slowing down the economy, so that the anticipated recovery will not yet materialise in the first quarter of 2021. Nevertheless, the economists from Savings Banks, Landesbanken and DekaBank are forecasting a recovery in the German economy: they expect to see growth by 3.5 percent in 2021 and by 3.1 percent in 2022.

“Once the current lockdown measures help to make the pandemic manageable for the health authorities, investments and consumption will quickly pick up again. The current measures have merely interrupted and postponed the economic recovery. The prospects of recovery as such remain intact”, said DSGV President Helmut Schleweis during the presentation of the economic forecast.

The chief economists at the Savings Banks Finance Group draw particular optimism from the fact that the second wave of infections and the containment measures have so far had much less of an impact than the first lockdown. It is true that some sectors of the economy – such as the services sector, hotels and restaurants and over-the-counter retailing – have been particularly hard hit by the pandemic. However, the share of these directly affected businesses in overall economic value added is relatively small; at macro-economic level, the continued recovery of the manufacturing sector and very robust development in the retail sector will largely compensate for the losses incurred.

In the recent lockdown, disruptions in the supply chain have largely failed to materialise – unlike during the first pandemic wave ‒ so that many companies have been able to keep up production. And the German economy has also been significantly supported by foreign demand. In addition, the chief economists of the Savings Banks Finance Group believe that private consumption will be a key driver for economic recovery this year and next year.

“Consumers are still as eager to invest in savings plans as they were directly after the attacks on the World Trade Center in 2001. However, this is mainly due to the lack of consumption opportunities. Since its peak in spring 2020, the savings rate has already significantly normalised in the third quarter. Owing to the unusually high savings accumulated during the crisis, many private households have built up financial reserves; once the pandemic has been overcome, it is likely that at least part of these reserves will stimulate demand because of pent-up consumption needs”, said Christian Lips, Chief Economist of NordLB, who presented the economic forecast on behalf of the chief economists of the Savings Banks Finance Group this year, together with DSGV President Helmut Schleweis.

The chief economists of the Savings Banks Finance Group believe that the 2019 pre-crisis level of real GDP will be restored by the end of 2021. This does not mean, however, that the two years of lost growth will have been made up by that point. And in 2022, the losses will be made up only to a limited extent. As DSGV President Helmut Schleweis emphasised: “The economic recovery will crucially depend on the pace and impact of the vaccination campaigns!”