Covid-19 Lecture on the state of the economy set for June 16

"Ten times more investment than in the last financial crisis"

Do companies already have the worst behind them?

We will only find out in the next months how many companies will survive. As it now stands, the number of bankruptcies actually dropped during the last year, because the obligation to declare insolvency under certain circumstances was suspended by the legislature. Economists are offering different forecasts on whether the number of bankruptcies will shoot up after the pandemic or not be so bad. In the broader picture, the economy will benefit from the fact that the political sector has deployed tremendous subsidy packages. Many countries have mobilized ten times the amount of money they did in the last financial crisis. For example, Germany invested 33 percent of its gross domestic product due to the pandemic, while in 2008 it was "only" 3.5 percent. Japan invested 21 percent of its GDP compared to 2.2 percent, in India the figure was 10 percent, as compared to 1.2 percent. The particularly positive thing in Germany is that a lot of future-oriented programs were launched, aimed for example at the energy transformation and digitalization.

How do things differ among the various industrial sectors?

The recovery in the individual sectors will primarily depend on whether or not customers have acquired alternatives during the pandemic. We assume this will be the case for example with business travel, where many companies have already cut their travel budgets for the future. In retail there are fears that it won't be possible to win back the original appeal to the same degree, even in Munich's best locations. However, this is another example of the fact that in many cases we're seeing developments which began before Corona and which have only been amplified in the meantime. These trends are for the most part linked with digitalization, one reason why many companies have made tremendous increases in their activities during the pandemic. And we still see problems with small and medium-sized enterprises, a third of which don't even have their own websites.

What can companies learn from the pandemic period, apart from digitalization?

They can learn to make their supply chains more stable. For example, at the beginning of the pandemic automobile manufacturers started placing cancellations with chip manufacturers, while the computer industry greatly increased demand. The chip manufacturers redeployed, and now the automotive sector is experiencing serious bottlenecks. One lesson can be to once again plan for larger buffers and reserves, following decades where efficiency and just-in-time production were the highest priorities. In addition companies would be better able to calculate risks if transparency is improved along the entire supply chain, i.e. also regarding the suppliers of the suppliers of their component suppliers. This may sound obvious, but it's not taken for granted by companies where this would involve hundreds of other companies. And by the way, another current topic can play a positive role here too: The debate about sustainability and the new German supply chain act.