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The Economic Costs of the Coronavirus Shutdown for Germany: A Scenario Calculation

Author

Listed:
  • Florian Dorn
  • Clemens Fuest
  • Marcell Göttert
  • Carla Krolage
  • Stefan Lautenbacher
  • Sebastian Link
  • Andreas Peichl
  • Magnus Reif
  • Stefan Sauer
  • Marc Stöckli
  • Klaus Wohlrabe
  • Timo Wollmershäuser
Abstract
This study uses scenario calculations to estimate the economic costs of the partial closure of the economy due to the coronavirus epidemic. With a shutdown duration of two months, the costs reach between EUR 255 billion and EUR 495 billion, depending on the scenario, and reduce the annual growth rate of GDP by between 7.2 and 11.2 percentage points; with a shutdown duration of three months they reach EUR 354 to 729 billion (10.0 to 20.6 percentage points growth loss). On the labor market, up to 1.8 million jobs subject to social security contributions (1.35 million full-time equivalents) could be cut and more than six million employees could be affected by short-time work. Public budgets will be burdened by up to EUR 200 billion, not including the extensive planned guarantees and loans. For political decisions it is particularly relevant to know how expensive it is to extend the shutdown. We see that a single week of extension will cause additional costs of EUR 25 to 57 billion and thus a decline in GDP growth of 0.7 to 1.6 percentage points. Given these costs, it is particularly urgent to develop strategies to make the resumption of economic activity compatible with containing the coronavirus epidemic.

Suggested Citation

  • Florian Dorn & Clemens Fuest & Marcell Göttert & Carla Krolage & Stefan Lautenbacher & Sebastian Link & Andreas Peichl & Magnus Reif & Stefan Sauer & Marc Stöckli & Klaus Wohlrabe & Timo Wollmershäuse, 2020. "The Economic Costs of the Coronavirus Shutdown for Germany: A Scenario Calculation," EconPol Policy Brief 21, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econpb:_21
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    References listed on IDEAS

    as
    1. Dolls, Mathias & Fuest, Clemens & Peichl, Andreas, 2012. "Automatic stabilizers and economic crisis: US vs. Europe," Journal of Public Economics, Elsevier, vol. 96(3), pages 279-294.
    2. Martin S Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2021. "The Macroeconomics of Epidemics [Economic activity and the spread of viral diseases: Evidence from high frequency data]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5149-5187.
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    Cited by:

    1. Fuest, Clemens & Immel, Lea & Neumeier, Florian & Peichl, Andreas, 2023. "Does expert information affect citizens’ attitudes toward Corona policies? Evidence from Germany," European Journal of Political Economy, Elsevier, vol. 78(C).
    2. Demmelhuber Katrin & Sauer Stefan & Wohlrabe Klaus, 2023. "Beyond the Business Climate: Supplementary Questions in the ifo Business Survey," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 243(2), pages 169-182, April.
    3. Richiardi, Matteo & Bronka, Patryk & Collado, Diego, 2020. "The Covid-19 crisis response helps the poor: the distributional and budgetary consequences of the UK lock-down," Centre for Microsimulation and Policy Analysis Working Paper Series CEMPA5/20, Centre for Microsimulation and Policy Analysis at the Institute for Social and Economic Research.
    4. Florian Dorn & Clemens Fuest & Florian Neumeier, 2020. "After the Great Economic Collapse: Germany’s Stimulus Package to Recover the Economy in Times of Covid-19," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 21(02), pages 38-46, July.
    5. Angelini, Elena & Darracq Pariès, Matthieu & Zimic, Srečko & Damjanović, Milan, 2020. "ECB-BASIR: a primer on the macroeconomic implications of the Covid-19 pandemic," Working Paper Series 2431, European Central Bank.

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