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Oecd Economic Surveys: Germany 2020 © Oecd 2020 4  OECD Economic Surveys Germany OVERVIEW http://www.oecd.org/economy/germany-economic-snapshot/ Germany This document, as well as any data and any map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. OECD Economic Surveys: Germany© OECD 2020 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgement of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected] of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 3 Executive summary OECD ECONOMIC SURVEYS: GERMANY 2020 © OECD 2020 4 The economy is in recession rapid withdrawal of support could derail the recovery, particularly if underlying growth is weak. The German economy experienced a severe contraction in 2020 (Table 1) following a decade- Figure 1. Increases in unemployment were long expansion. The initial COVID-19 outbreak was cushioned by short-time work brought under control with less stringent Jan 2020 May 2020 Spain containment measures than in many countries Canada thanks to high health sector capacity and early United States testing, tracing and isolation of cases. Resurgence Sweden of the virus in October led to renewed nationwide OECD containment measures in November, including France closure of hospitality and entertainment venues, Italy while retail as well as schools remained open. Germany 0 3 6 9 12 15 The economy has been hit hard by the collapse Unemployment rate, % of labour force in global trade. Germany exports a large part of its Note: Data for United States refer to June. Temporary layoffs are output, particularly manufactured capital goods. included in unemployment figures for the United States and Canada Key trading partners in Europe have been badly but not for the other countries. affected by the crisis and stalling global investment Source: OECD Short-Term Labour Force Statistics database. has seen demand for capital goods plunge. StatLink 2 https://doi.org/10.1787/888934200261 Table 1. A deep recession in 2020 Structural reforms and infrastructure 2020 2021 2022 Gross domestic product -5.5 2.8 3.3 investment can support the recovery Unemployment rate 4.2 4.8 4.3 The COVID-19 crisis exacerbates structural Fiscal balance (% of GDP) -6.3 -4.4 -1.8 challenges from weak external demand and the Public debt (gross, Maastricht, % of GDP) 73.9 76.2 75.8 energy transition. Policy needs to facilitate the Source: OECD Economic Outlook 108 database. shift to cleaner energy and new technologies in the automotive industry, while accelerating progress on Increasing unemployment was cushioned by digital transformation. the government-supported short-time work Infrastructure investment, which is critical for scheme. Short-time work bore a much bigger part digital transformation and decarbonisation, has of the reduced demand for labour than did been insufficient and could be an important unemployment (Figure 1), with almost 20% of all part of the recovery. Public investment has dependent workers in short-time work in April 2020. stepped up since 2014 (Figure 2) and further An extended downturn would increase the need for spending on low-emission transport, digitalisation resource reallocation, in which case consideration and health has been announced. These are key should be given to more active labour market areas where more investment is needed, along with policy, such as training or placement assistance. social housing, early childhood education and A strong government response to the crisis has electricity networks. Two decades of low reinforced health system capacity while investment have left a backlog, while construction protecting jobs and firms. Loans, guarantees, and administrative capacity and cumbersome grants and equity injections safeguarded liquidity, planning procedures constrain delivery. while a recovery package is supporting Infrastructure governance reforms and active consumption and investment. These measures federal government support are needed to notwithstanding, bank vulnerabilities should be overcome capacity constraints. Independent monitored closely as corporate and household infrastructure planning advice would improve defaults are liable to increase. There is around alignment across sectors and provide greater EUR 140 billion (4¼ per cent of GDP) of certainty for construction sector companies to discretionary stimulus in 2020. The rate of expand capacity. Further streamlining planning consolidation needs to be carefully managed, as a processes, cooperation between agencies and OECD ECONOMIC SURVEYS: GERMANY 2020 © OECD 2020 5 more attractive employment conditions for public Figure 3. GHG emissions per capita are high sector planners would help. Municipalities’ compared with other European countries revenues have been hit hard by the crisis and Total greenhouse gas emissions per capita¹ measures to partially compensate for shortfalls will 25 25 be insufficient to make up the backlog of municipal 2018 or latest available year 20 20 investment in transport infrastructure and schools. 2005 Figure 2. Public investment has recovered, but 15 15 net municipal investment is still negative 10 10 Net public investment¹ by level of government, % of GDP 5 5 0.6 0.6 Local government 0 0 0.5 Regional government (Lander) 0.5 GBR FRA ITA ESP OECD JPN DEU OECD USA 0.4 Central government 0.4 Europe General government 0.3 0.3 1. Excluding land use, land use change and forestry; thousand 0.2 0.2 kilograms per capita. 0.1 0.1 Source: OECD Environment Database. 0 0.0 StatLink 2 https://doi.org/10.1787/888934200299 -0.1 -0.1 -0.2 -0.2 -0.3 -0.3 Unleashing digital transformation 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1. Public gross fixed capital formation less depreciation Germany is a world leader in technology and Source: OECD National Accounts database. engineering, but lags on digital transformation. Access to high-speed broadband networks could StatLink 2 https://doi.org/10.1787/888934200280 be improved, particularly in rural areas. Mobile data Germany made considerable progress on usage and connection speeds are also low. Firms climate change policy in 2019, which must not in Germany are behind in the adoption of key ICT be derailed by the COVID-19 crisis. Key steps tools required to create value with data, such as include introduction of emissions pricing in high-speed broadband and cloud computing transport and heating, increased support for (Figure 4). electric vehicles and charging stations, higher To improve connectivity, administrative targets for renewable power generation, and a processes should be streamlined and commitment to cease coal-fired generation by 2038 competition enhanced. The ambitious goal for at the latest. Despite success deploying nationwide gigabit Internet coverage by 2025 is renewables in the electricity sector over the past two decades, emissions are high (Figure 3). welcome, as are public broadband subsidies, if used efficiently. However, the disbursement of Further policy steps are needed to meet the funds has been slow. Long approval processes target to reduce greenhouse gas emissions by delay progress, particularly in relation to rights of 55% by 2030. Coal-fired generation should be way required to build infrastructure. The entry of a reduced ahead of schedule via stronger price fourth network operator to the mobile market is a signals, which is a cost-effective way to decrease emissions. Stronger price signals would also positive development and should be supported by promote more efficient waste management. Energy regulatory policy for this to increase competition efficiency requirements on new buildings are high, and outcomes for consumers. but energy efficient renovations need to increase Barriers to firms’ adoption of advanced ICTs by at least 50% to meet the 2050 goal of a near and investment in knowledge-based capital climate-neutral building stock. The transport sector need to be addressed. Innovation and productivity is unlikely to meet its 2030 abatement target. Further action is needed on pricing for fuels, are held back by firms’ sluggish adoption of vehicles and roads, while providing alternatives advanced ICTs that are crucial to create value with through sustainable transport modes. data, SMEs’ difficulties to access bank financing, a low initial cap on new research and development tax incentives and digital security concerns. More OECD ECONOMIC SURVEYS: GERMANY 2020 © OECD 2020 6 venture capital is essential to finance start-ups with The crisis risks exacerbating labour high growth potential
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