The decline in economic output in 2020 was significantly greater than in 2008/09 in the financial market and economic crisis – but the bottom seemed to have been passed and the recovery phase had begun, the Wifo said. However, the uncertainty persists, also regarding the further course of the pandemic. The forecasts of Wifo and IHS are subject to the proviso that no second big wave flares up – because the longer the economy would not be active, the more it could be permanently damaged.
The IHS expects GDP to decline 9.5 percent year-on-year in the first half of the year – and Wifo assumes that in the second half of March economic output will have shrunk by up to a quarter. According to the Oesterreichischer Nationalbank (OeNB), the decline in weekly economic output in the lockdown was around 25 percent (late March to mid-April) and 20 percent (mid-April to early May), the IHS recalls. Since the beginning of May it has been around 10 percent minus.
Less consumption and investment
The closing steps triggered supply shocks – and the reluctance to consume, invest and demand from abroad also triggered demand shocks. The economic outlook changed fundamentally within a few weeks. On the supply side, the production of goods, gastronomy, accommodation and transport came under pressure. A recovery is now emerging – because of the gradual withdrawal of the containment measures and because private households and companies are increasingly adapting to certain permanent restrictions, according to the Wifo.
The economic downturn is devastating for the labor market – the long-term build-up of employment ended abruptly in March and unemployment rose significantly. Short-time work limits the negative effects and should keep people for the coming recovery in the companies. Nevertheless, Wifo expects employment to drop by 2.1 percent in 2020, after a 1.6 percent increase in 2019 – the IHS assumes a 2.5 percent decline and then a 1.5 percent increase. “Most of the crisis-related adjustment in the labor market is likely to come from a reduction in working hours,” said Wifo. This year, 7.0 percent fewer hours will be worked, and in 2021 4.6 percent more.
Global economy also plummeted
The global economy also crashed – the IHS speaks of the strongest slump in the global economy since the 1930s. Internationally, economic activity was drastically curtailed in many countries in the first and especially in the second quarter due to the rapid increase in the number of infections worldwide – however, due to the gradual easing, a gradual recovery is expected for the rest of the year. “The global recession is likely to have bottomed out in the second quarter and the global economy should expand again by mid-year,” said the IHS. In his view, the eurozone should shrink by 8.5 percent this year, stronger than Austria, and then grow by 6.3 percent in 2021. The global economy can be seen to decline by 4.8 percent this year, and should then grow by 5.3 percent in 2021. Global trade is hit harder, which should collapse by 13 percent this year and regain momentum by 8 percent in 2021, according to the IHS.
Austria’s exports are slumping this year due to the global recession, namely by 14.8 percent from the Wifo’s perspective, while goods exports alone are falling by 13.5 percent. It is hoped that there will be an increase of 9.5 or 7.1 percent in 2021. The IHS is forecasting an 11.3 percent decline in total exports this year, and a 20.0 percent increase in 2021; Imports are seen 7.3 percent lower this year due to weak domestic demand, but then expect 5.4 percent growth.
Investments in Austria are expected to fall by 6.5 percent this year and then 4.8 percent in 2021. According to a survey in May, 21 percent of companies canceled investment projects – particularly in the service and material goods sector, less in the construction industry, according to the Wifo. Private consumption is expected to shrink by 5.5 percent this year, the institute assumes, and in 2021 there will be a 4.5 percent expansion through a lower savings rate.
(Those: APA)
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