OECD Economic Surveys: Germany 2020
The German economy entered a deep recession in 2020 due to the coronavirus pandemic. A strong government response has reinforced health system capacity while protecting jobs and firms. The response to the crisis has included increases in investment to meet structural challenges from the energy transition and digital transformation. Further public investment is needed to resolve the infrastructure backlog, along with steps to remove delivery bottlenecks. Emissions pricing in transport and heating will help reduce greenhouse gas emissions, though further steps will be needed to meet targets. The German government has made good progress in addressing some key barriers to digital transformation, but can do more to unleash its full benefits. Alleviating connectivity bottlenecks, incentivising investment in knowledge-based capital and supporting business dynamism during the recovery by reducing administrative burden, facilitating access to financing, and accelerating progress towards digital government can boost technology diffusion and productivity. To empower everyone to thrive in digital environments, computational thinking should be introduced earlier and training for teachers increased to ensure effective use of digital technologies in schools.
SPECIAL FEATURE: UNLEASHING THE BENEFITS OF DIGITAL TRANSFORMATION
Key policy insights
The German economy is experiencing a severe contraction in 2020 and the recovery will require sustained macroeconomic policy support. Germany managed the initial stages of the crisis well, as high health sector capacity and early testing, tracing and isolation of cases helped bring the initial virus outbreak under control with less stringent containment measures than in many neighbouring countries. A strong government response is protecting jobs and firms, using fiscal space from prudent budgeting before the crisis. The German government has taken a leadership role in establishing the EU Recovery and Resilience Facility, which will support the European recovery through EUR 750 billion in loans and grants to member states funded by new EU debt.
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