COVID-19 CRISIS' ECONOMIC IMPACT ON GERMANY - A PERSPECTIVE - PRELIMINARY WORKING DOCUMENT - MCKINSEY ...
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COVID-19 crisis’ economic impact on Germany – a perspective Preliminary working document April 3rd, 2020
Current as of April 3, 2020
Disclaimer (1/2)
• COVID-19 is, first and foremost, a humanitarian challenge. COVID-19 has affected communities on
multiple continents. Thousands of health professionals are heroically battling the virus, putting their own
lives at risk.
• Solving the humanitarian challenge is the top priority. Much remains to be done globally to respond
and recover, from counting the humanitarian costs of the virus, to supporting the victims and families, to
developing a vaccine.
• This document is meant to help with a narrower goal: provide facts and insights on the current
COVID-19 situation to help decision-makers understand best practices. In addition to the
humanitarian challenge, there are implications for the wider economy, businesses, and employment. This
document sets out some of those challenges and how organizations can respond in order to protect their
people and navigate through an uncertain situation.
McKinsey & Company 2Current as of April 3, 2020
Disclaimer (2/2)
The following analyses are based on our current understanding of the economic effects of the
COVID-19 outbreak. This is an ongoing, rapidly developing environment with a very high degree of
uncertainty even in the short term.
The economic models and forecasts are simplified and do not fully reflect the complexity of the
economic reality.
All numbers and forecasts are therefore highly indicative.
McKinsey & Company 3Current as of April 3, 2020
Executive Summary: COVID-19 crisis’ economic impact on Germany
PRELIMINARY
The dual The "dual imperative of our time" is to safe lives and safeguard livelihoods to overcome the current crisis
imperative of our 9 global scenarios for how the COVID-19 crisis could develop were published by the McKinsey Global Institute in March 2020
time and global One of the most likely MGI scenarios for the global development, assumes a drop of real global GDP by ~6% between Q4 2019 and Q2 2020, as well as a ~-5% GDP
outlook decline in 2020 overall
Implications for In the two most likely MGI scenarios for Germany, the German GDP is expected to drop by between ~9% and ~12% in Q2 2020. For the entire year of 2020, MGI
German industry expects a drop between ~4% and ~9% in a V or U shape recovery respectively
sectors and Taking a more granular and short-term look, we estimate the GDP drop of the next calendar week (CW15) to be ~26%, a weekly loss of EUR ~15bn
economy − Effects are mostly driven by weak demand. This is due to uncertainty/ low consumer sentiment as well as sectoral shut-downs, e.g. accommodation and food,
air transport and parts of retail
− Overall, the manufacturing activity is hit particularly hard with weekly GDP likely to drop by ~38%, equivalent to EUR ~5.2 bn
− Retail sector: Strong growth in grocery and in online pure players contrasts with 0 sales, e.g. in apparel/ luxury or electronics/ IT store retailers
− Human health and social work: Demand for large parts of health services has declined strongly, e.g., for practitioners, physiotherapists and dental technicians. Covid-
19 related demand does not counterbalance this effect
German Germany's stimulus package is one of the largest in the world. It accounts for ~23% of GDP, surpassing all European countries (e.g., France ~15%), except for the UK
government 9 out of 27 German industry sectors likely to struggle high or very high liquidity challenges in Q2. Sectors with highest liquidity risk expected to be accommodation
response so far and food, air transport, arts and entertainment as well as metal manufacturing (driven by severe demand shocks of up to 95% of total demand, high capital spending
as well as high share of SMEs or high number of independent entrepreneurs that are less likely to hold significant cash reserves)
The overall size of the stimulus package amounts to EUR 750 bn, which includes EUR 600 bn to be spent on loan programs, guarantees, and direct equity financing
(Wirtschaftsstabilisierungsfonds), EUR 50 bn to support SMEs via direct payments, EUR 100 bn to finance other programs and support households (e.g.,
Kurzarbeitergeld)
− KfW special loan program: 1,189 applications to date amount to a loan volume of EUR ~8.7 bn, 95% of which are covered by only 19 applications
− Kurzarbeit : ~476,000 applications in March lead to a projected number between ~4.8 and 7.2 mn Kurzarbeiter in Q2 2020 based on expected sector-specific
demand shocks and Kurzarbeit applications per industry sector in 2019
McKinsey & Company 4Current as of April 3, 2020
Contents 01 The dual imperative of our time
and global outlook
02 Implications for German industry
sectors and economy
03 German government response so far
McKinsey & Company 5Current as of March 25, 2020
The dual imperative of
our time
Situation Resolution “Timeboxing” the virus and the economic shock
Safe- Daily reports of increasing 1 Suppress the virus as
infections and deaths across fast as possible 1
guard the world raise our anxiety
our and, in cases of personal
2 Expand treatment
2
lives loss, plunge us into grief. and testing capacity
There is uncertainty about 3
tomorrow; about the health
3 Find “cures”; Case count
and safety of our families,
treatment, drugs,
friends, and loved ones; and
vaccines
about our ability to live the
lives we love
Safe- In Europe and in the United 1 Support people and
States, the required businesses affected
guard “lockdowns” of the population by lockdowns
our and other efforts to control
3
lively- the virus are likely to lead to
Prepare to get back
the largest quarterly decline 2 1
hoods in economic activity since to work safely when
GDP
1933 the virus abates
3 Prepare to scale the
recovery 2
Source: McKinsey Global Institute analysis, in partnership with Oxford Economics McKinsey & Company 6Current as of March 25, 2020
9 global scenarios for how the COVID-19 crisis could develop were
published by the McKinsey Global Institute
GDP Impact of COVID-19 Spread, Public Health Response, and Economic Policies Detailed next
Rapid and effective
Control of Virus Spread
B1 A3 A4
Strong public health response succeeds
in controlling spread in each country
within 2-3 months Virus contained, but sector damage; Virus contained, growth rebound Virus contained; strong growth rebound
Virus Spread & lower long-term trend growth
Public Health Effective Response, but
Response (regional) Virus recurrence B2 A1 A2
Effectiveness of the public Public health response initially succeeds
health response but measures are not sufficient to prevent
in controlling the spread viral recurrence so social distancing Virus recurrence; slow long-term growth Virus recurrence; return to trend growth
Virus recurrence; slow long-term growth Muted World Recovery Strong World Rebound
and human impact continues (regionally) for several months
of COVID-19
Broad Failure of
Public Health Interventions
B3 B4 B5
Public health response fails
to control the spread of the virus
for an extended period of time Pandemic escalation; prolonged Pandemic escalation; slow progression Pandemic escalation; delayed but full
(e.g., until vaccines are available) downturn without economic recovery towards economic recovery economic recovery
Ineffective Partially Effective Highly Effective
Interventions Interventions Interventions
Self-reinforcing recession dynamics Policy responses partially offset Strong policy responses prevent
kick-in; widespread bankruptcies and economic damage; banking crisis structural damage; recovery to pre-
credit defaults; potential banking crisis is avoided; recovery levels muted crisis fundamentals and momentum
Knock-on Effects & Economic Policy Response
Speed and strength of recovery depends on whether policy moves can mitigate
self-reinforcing recessionary dynamics (e.g., corporate defaults, credit crunch)
Source: McKinsey Global Institute McKinsey & Company 7Current as of March 25, 2020
Scenario A1 at global level:
Muted recovery
Real GDP, Local Currency Indexed
Real GDP growth – COVID-19 Crisis World Real GDP drop 2020 GDP Time to return to
Local Currency Units Indexed, 2019 Q4=100 USA
Q4 2019-Q2 2020 growth pre-crisis
% Change % Change Quarter
110 Eurozone
China1
China -3.9% -2.7% 2021 Q2
105
100 USA -10.6% -8.4% 2023 Q1
95
World -6.2% -4.7% 2022 Q3
90
Eurozone -12.2% -9.7% 2023 Q3
85
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021
1. Seasonally adjusted by Oxford Economics
Source: McKinsey analysis, in partnership with Oxford Economics (current as of March 25 2020) McKinsey & Company 8Current as of April 3, 2020
Contents 01 The dual imperative of our time and
global outlook
02 Implications for German industry
sectors and economy
03 German government response so far
McKinsey & Company 9Current as of April 3, 2020
Key messages chapter 2: Implications for German industry sectors
and economy
PRELIMINARY
Page in this
document
− In most likely MGI scenarios German GDP expected to drop by between ~9 and ~12% in Q2. For the entire year of 2020, MGI p. 10-11
GDP impact scenarios for expects a drop between ~4 and ~9%
Germany − Scenario A1: Repeated shut-downs and activations of government measures lead to a U-shaped pattern with prolonged
recession
− Scenario A3: After government measures are lifted, economy returns to normal from Q3 of 2020 on, leading to a V-shaped
recovery
− Current non-McKinsey scenarios also assume either a U shape with a longer-lasting recession or a V shape with
comparably quick recovery
− GDP growth estimates for 2020 range between -2.8% (Sachverständigenrat), with the recovery starting in May, and -17.5% (ifo
Institut), with a slow recovery from summer on
Supply and demand − Taking a more granular and short-term look, we estimate the GDP drop of the next calendar week (CW15) to be ~26%, a weekly p. 12-14
effects across industry loss of more than EUR ~15 bn
sectors − Effects are mostly driven by weak demand. This is due to uncertainty/ low consumer sentiment as well as sectoral shut-
downs, e.g. accommodation and food, air transport and parts of retail
− Overall, the manufacturing activity is hit particularly hard with weekly GDP likely to drop by ~38%, equivalent to EUR ~5.2 bn
− Retail sector: Strong growth in grocery and in online pure players contrasts with 0 sales, e.g. in apparel/ luxury or electronics/ IT
store retailers
− Human health and social work: Demand for large parts of health services has declined strongly, e.g., for practitioners,
physiotherapists and dental technicians. Covid-19 related work does not counterbalance this effect
Note: All analyses are based on the COVID-19 German Office team analyses as part of the European COVID-19 Economic Impact and Recovery War Room.
Continuous MGI updates are expected and will be reflected in further releases.
Source: McKinsey McKinsey & Company 10Current as of April 3, 2020
In most likely MGI scenarios German GDP
drops by ~-4 to ~-9 % until the end of 2020
PRELIMINARY
MGI scenario results for Germany1
year on year quarterly data, in percent
Scenario A3 Scenario A3
~-4% 10.7 Due to Covid-19 related government measures
10 7.7 (e.g. shut-downs) and weak demand, GDP
2.3 1.1 0.6 1.0 0.3 0.6 0.5 -0.6 1.1 2.9 1.7 1.5 1.4 1.3 1.2 1.0 1.0 1.0 expected to drop by ~8.5% in Q2 2020
2.1 -1.1
0 -5.8 As the situation normalizes from Q3 on,
-8.5 economic activity returns to pre-outbreak levels
-10 by end of 2020
Some catch-up takes place in first half of 2021
Scenario A1 Scenario A1
~-9% Repeated shut-downs and activations of
10 government measures due to Covid-19
4.1 5.0 5.3 5.2 4.8 4.4 3.9 3.5
2.3 1.1 0.6 1.0 0.3 0.6 0.5
-1.0 0.9 2.4 outbreaks result in a prolonged crisis
2.1 -1.3
0 This crisis leads to numerous insolvencies with
negative consequences for supply chains and
-10 -12.8 -13.0 business ecosystems
-11.6 -12.5
As a consequence, recovery takes
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 significantly longer
2018 2019 2020 2021 2022 2023
Note: difference to more pessimistic scenarios in particular due to better outlook on repeated spread of
Covid-19 and countermeasures implemented
Source:
1. McKinsey
Analysis as of Global Institute
March 25 2020.based on Oxford
Outlooks Economics
might change simulations
based on additional insights. McKinsey & Company 11
Source: McKinsey Global InstituteCurrent as of April 3, 2020
Current external scenarios also assume either a V shape with
comparably quick recovery or a U shape longer-lasting recession
PRELIMINARY
Institute
Scenario V curve U curve Baseline Deep V curve Long U V curve U curve Long u curve V curve U curve V curve U curve
scenario, V
curve
Length of 5 weeks Repeated 5 weeks ~ 2 months ~ 5 months 1 month 2 months 3 months 6 weeks 3.5 months 1.5 months 4.5 months
shutdown
Other High Repeated China recovery Wide production Deep changes 2 months for 3 months 4 months Quick recovery Slow recovery Recovery from Recovery from
effectiveness of government with standstill to economic recovery recovery recovery from May on from July on May on, over 6 August on, over
charac-
virus interventions normalization in structure months 6 months
teristics containment required to summer Measures going
contain virus beyond April High uncer-
2020 tainty, many
insolvencies
GDP
Q2 2020 -8.5% -11.6% -7.5% -4.4% Up to -40.4% (in Up to -40.4% (in Up to -40.4% (in Up to -26% (in Up to -23 (in Up to -26% (in Up to -23 (in
peak month) peak month) peak month) peak months – peak months – peak months – peak months –
April) April - June) April) April - June)
Q3 2020 -5.8% -12.8% +2.6% +2.6% -0.3%
2020 -4% -9% -2.8% -5.4% -4.5% -6.4% -11.9% -17.5% -5% -10% -4.5% -8.7%
Source: McKinsey Global Institute analysis in partnership with Oxford Economics, German Council of Economic Experts, Ifo Institute, German Economic Institute (IW Köln), McKinsey & Company 12
Institute for the World Economy (IfW Kiel)Current as of April 3, 2020
First outlook on CW 15: the majority of German industry sectors are
expected to experience a significant demand side shock
Supply and demand effect in CW 15 Limiting factor
PRELIMINARY
Expected drop of GDP through Expected drop of GDP through Expected GDP drop Rank of GDP
Annual GDP per industry sector supply side shock demand side shock EUR bn, change relative to drop
EUR bn, 2017 Percent per week Percent per week average 2019 GDP per week Rank (out of 25)
Other manufacturing and mining1 330 -19 -46 -3.07 1
Human health and social works 221 -5 -35 -1.57 4
Wholesale (incl. retail of motor vehicles) 192 -17 -45 -1.76 3
Professional services 187 -4 -10 -0.36 13
Real estate activities2 180 -1 -2 -0.08 21
Public administration 178 0 0 0 25
Administrative services 148 -12 -11 -0.36 12
Construction 138 -26 -4 -0.74 6
Information and communication 134 -4 -7 -0.19 16
Education 133 0 -10 -0.27 14
Transport and logistics without airlines 121 -24 -23 -0.59 7
Arts, entertainment and other services 111 -21 -95 -2.15 2
Chemicals manufacturing 103 -20 -19 -0.41 10
Retail 101 -4 -27 -0.55 8
High tech manufacturing 85 -18 -21 -0.37 11
Energy and utilities 81 -2 -15 -0.25 15
Metals manufacturing 77 -24 -31 -0.49 9
Banking 72 -8 -2 -0.12 18
Accommodation and food 47 -41 -95 -0.90 5
Food and beverages manufacturing 46 -4 -10 -0.09 19
Insurance 46 -9 -5 -0.08 20
Agriculture 27 -2 -12 -0.06 22
Pharma manufacturing 22 -12 0 -0.06 24
Textiles manufacturing 8 -23 -37 -25% GDP shock -0.06 23
Air transport 7 -37 -90 -0.14 17
Total economy 2,922 ~-15
1. Covers mining as well as the remaining manufacturing Supply side shocks calculated based on changes in deployed workforce due to Demand side shocks calculated based on external and
activities, i.e., manufacture of motor vehicles, of machinery
infection rates, limitations in remote working, and physical proximity during the domestic demand drop in the 2009 crisis that has been
and equipment, and other manufacturing
production process. Adjustments are made for essential sectors only. Impact of non- refined by specificities of the current situation (in particular
2. Includes imputed rent from house owners deployed labor force on GDP calculated using industry sector's value added. shutdown effects) and in expert McKinsey interviews.
Source: Eurostat; BLS (O*Net); McKinsey analysis McKinsey & Company 13Current as of April 3, 2020
The labor supply shock is largely driven by the impact of Covid-19
on the deployed work force in the different sectors
Sector producing essential goods or services
Details on supply effect in CW 15
PRELIMINARY
Physical proximity Limitations in remote Expected deployed Expected drop of GDP
Workforce per sector
2018, thousand
in production working workforce through supply side shock
Index Index (out of 4) Percent Percent per week
Other manufacturing and mining1 5,812 55 4.0 0.70 -19
Human health and social works 2,703 77 4.0 0.94 -5
Wholesale (incl. retail of motor vehicles) 2,848 58 3.3 0.71 -17
Professional services 473 52 1.4 0.93 -4
Real estate activities2 2,616 60 3.0 0.73 -1
Public administration 1,030 65 3.0 0.68 0
Administrative services 3,291 62 2.0 0.83 -12
Construction 2,479 65 4.0 0.55 -26
Information and communication 1,283 54 1.3 0.93 -4
Education 2,491 66 3.0 0.67 0
Transport and logistics without airlines 2,193 60 4.0 0.62 -24
Arts, entertainment and other services 1,405 66 3.2 0.64 -21
Chemicals manufacturing 2,991 57 4.0 0.67 -20
Retail 1,062 66 4.0 0.94 -4
High tech manufacturing 3,226 54 4.0 0.72 -18
Energy and utilities 857 57 4.0 0.94 -2
Metals manufacturing 528 57 4.0 0.67 -24
Banking 1,185 56 2.0 0.87 -8
Accommodation and food 627 74 4.0 0.40 -41
Food and beverages manufacturing 906 61 4.0 0.94 -4
Insurance 1,854 56 2.0 0.87 -9
Agriculture 934 39 4.0 0.94 -2
Pharma manufacturing 503 55 4.0 0.70 -12
Textiles manufacturing 615 57 4.0 0.66 -23
Air transport 127 69 4.0 0.49 -37
Total economy 44,248 0.76 -11
Note: Deployed workforce share calculated based on level of physical proximity in production (based on an index from 0 to 100, where a higher number represents higher proximity), and limitations in
remote working (assessment of "home office potential“). In case of essential goods or services being produced, the model adjusts the impact of these two factors (e.g., health care workers). Impact of
missing labor force on GDP calculated using labor share of respective industry sector's value added.
1. Covers mining as well as the remaining manufacturing activities, i.e., manufacture of motor vehicles, of machinery and equipment, and other manufacturing 2. Includes imputed rent from house owners
Source: Eurostat; BLS (O*Net); McKinsey analysis McKinsey & Company 14Current as of April 3, 2020
First outlook on CW 15: Demand shock particularly high for sectors
affected by lockdown (e.g. air transport, accommodation and food)
Demand effect in CW 15 X Share of total demand per sector (%)
PRELIMINARY
Expected foreign demand shock1 Expected domestic demand shock2 Expected drop of GDP through demand side shock
Percent of GDP per sector Percent of GDP per sector Percent per week
Other manufacturing and mining3 -59 62 -24 38 -46
Human health and social works 0 0 -35 100 -35
Wholesale (incl. retail of motor vehicles) -33 25 -49 75 -45
Professional services -13 16 -9 84 -10
Real estate activities -21 1 -2 99 -2
Public administration 0 0 0 100 0
Administrative services -22 4 -10 96 -11
Construction 0 1 -4 99 -4
Information and communication -15 14 -6 86 -7
Education 0 1 -10 99 -10
Transport and logistics without airlines -35 22 -20 78 -23
Arts, entertainment and other services 0 2 -97 98 -95
Chemicals manufacturing -21 55 -18 45 -19
Retail 0 1 -27 99 -27
High tech manufacturing -21 73 -21 27 -21
Energy and utilities 0 10 -17 90 -15
Metals manufacturing -34 39 -30 61 -31
Banking 0 12 -2 88 -2
Accommodation and food -97 9 -95 91 -95
Food and beverages manufacturing -6 32 -11 68 -10
Insurance -7 6 -5 94 -5
Agriculture -14 20 -11 80 -12
Pharma manufacturing 0 56 0 44 0
Textiles manufacturing -38 93 -25 7 -37
Air transport -91 22 -90 78 -90
1 Exports; 2 Total consumption (private and government) plus investment (gross fixed capital formation); 3 Covers Mining and quarrying as well as the remaining manufacturing activities, i.e.,
manufacture of motor vehicles, trailers and other transport equipment, of machinery and equipment (incl. repair), of wood, paper, printing and reproduction, of furniture as well as other manufacturing
Note: Demand shock components calculated based on decline during past financial crisis (2008-2009) from Input-Output table and Trade Statistics. The overall expected demand shock per sector
represents a weighted sum of export and domestic shocks multiplied with the respective shares of total export and domestic demand sector output. Adjustments have been made to several sectors
based on government measures (lockdown), non-McKinsey impact estimations (e.g. Ifo) and expert interviews for highly affected sector during this particular crisis (e.g. automotive, air transport)
Source: Eurostat; BLS (O*Net); WIOD; UNComtrade; ITC Trademap; McKinsey analysis McKinsey & Company 15Current as of April 3, 2020
Contents 01 The dual imperative of our time and
global outlook
02 Implications for German industry
sectors and economy
03 German government response so
far
McKinsey & Company 16Current as of April 3, 2020
Key messages chapter 3: German government response so far
PRELIMINARY
Page in this
document
The German stimulus Germany's stimulus package is one of the largest in the world: pp. 17 – 18
package in international − The German package accounts for ~23% of GDP, surpassing all European countries (e.g., France ~15%), except for the UK
comparison − USD ~9,700 per capita are committed as part of the package, the highest in the world (next highest US with USD 9,400 per capita)
− Some affected economies (e.g., Denmark, Canada, Italy) with significantly lower stimuli
Expected liquidity 9 out of 27 German industry sectors likely to struggle with high or very high liquidity challenges in Q2 2020, mostly driven by p. 19
challenges in the German strong demand shocks
economy − Sectors with highest liquidity risk expected to be accommodation and food, air transport, arts and entertainment as well as
metal manufacturing (driven by severe demand shocks of up to 95% of total demand, high capital spending as well as high share
of SMEs or high number of independent entrepreneurs that are less likely to hold significant cash reserves)
Selected details on the The overall size of the package amounts to EUR 750 bn pp. 20 - 22
German stimulus package − EUR 600 bn of package to be spent on loan programs, guarantees, and direct equity financing (Wirtschaftsstabilisierungsfonds)
− EUR 50 bn to support SMEs via direct payments
− EUR 100 bn to finance other programs and support households (e.g., Kurzarbeitergeld)
KfW special loan program: 1,189 applications to date amount to a loan volume of EUR ~8.7 bn, 95% of which are covered by only 19
application
− First outlook: refinancing limit of EUR 100 bn could be reached in CW 25 (~mid-May) if current trend continues
Kurzarbeit : ~476,000 applications in March lead to a projected number between ~4.8 and 7.2 mn Kurzarbeiter in Q2 2020 based
on expected sector-specific demand shocks and Kurzarbeit applications per industry sector in 2019
Source: Johns Hopkins University, IHS, EUROSTAT, Data Library Professor Aswath Damodaran (NYU), The Federal Statistical Office Germany, JP Morgan McKinsey & Company 17
Working Capital Index, German Federal Government, KfWCurrent as of April 3, 2020
Germany has announced one of the largest COVID-19 stimulus
packages globally amounting to over 23% of its GDP
PRELIMINARY
Total size of stimulus response1 vs. number of recorded Covid-19 cases
Total size of stimulus response1 (as % of GDP)
30
25 UK
Germany
20
Spain
15 France
USA
Saudi Arabia
10
Pakistan New Zealand
Indonesia Australia
India Thailand UAE Uruguay Denmark
5 Argentina China Canada
Morocco Singapore
Malaysia South Korea
Nigeria Brazil Philipines Chile Italy
Japan
0
0.1 1.0 10.0 100.0 1,000.0 10,000.0
Number of recorded Covid-19 cases per 1 mn inhabitants2 (#)
1. Total number made public, to date
2. Number of cases recorded for March 25 2020
Source: Johns Hopkins University, IHS Data for GDP, Official government sources and press coverage of official announcements, UN for population data McKinsey & Company 18Current as of April 3, 2020
In terms of GDP per capita, Germany has so far announced
the largest Covid-19 stimulus package
PRELIMINARY
Size of stimulus response per capita1 vs. GDP per capita
Size of stimulus response1 per capita, in USD
10,000
Germany
UK
9,000 USA
8,000
7,000
Singapore
6,000
France
5,000
Spain
4,000 Australia
UAE
3,000
2,000
Brazil Canada
India Morocco
1,000 Malaysia Argentina Saudi Arabia New Zealand
Nigeria Uruguay South Korea
China Italy Japan Denmark
Indonesia Chile
0
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000
GDP per capita, nominal, in USD
1. Total number made public, to date
2. Number of cases recorded for March 25 2020
Source: Johns Hopkins University, IHS Data for GDP, Official government sources and press coverage of official announcements, UN for population data McKinsey & Company 19Current as of April 3, 2020
Accomodation & food, air transport, arts & entertainment and metal
manufacturing with highest expected liquidity risk in Q2
Liquidity risk analysis for selected sectors
PRELIMINARY
KPIs
Corporate KPIs1 Financial KPIs2 Non-financial KPIs Historic KPIs
Average number Business churn
Number of of employees Personal costs/ Market Debt to Short-term Debt to Capital Spending/ Severity of rate during financial
businesses per business turnover CCC3 Capital3 Total Debt3 Total Assets3 demand shock crisis '08/09
Sector 2017, in thousand 2017 2017, Percent 2019 2019, Percent 2019, Percent 2019, Percent Percent of total demand 2009, Percent Liquidity risk Q2
Other manufacturing and mining 7 87 38 5
47 38 5 4 45 5.9
Human health and social works 24 238 53
41 52 11 3 35 3.9
Wholesale (incl. retail of motor vehicles) 259 11 8
-2 85 3 3 45 9.1
Professional services 513 6 34
43 13 3 3 10 9.8
Real estate activities 161 3 10
96 46 5 1 2 14.3
Public administration N/A N/A 51
Administrative services6 211 17 34
436 136 36 36 11 10.3
Construction 338 7 28
44 27 7 2 4 7.6
Information and communication 133 10 26
28 36 6 3 7 12.3
Education N/A N/A 65
17 63 1 1 10 15.1
Transport and logistics without airlines 109 22 23
9 58 4 5 23 9.2
Arts, entertainment and other services3 349 9 40
4 35 6 3 95 13.2
Chemicals manufacturing 19 57 15
75 28 9 6 19 6.7
Retail 332 11 13
26 37 13 3 27 10.0
High tech manufacturing 13 67 26 97 12 21 4 21 6.7
Energy and utilities 8 63 4
39 38 8 5 15 5.5
Metals manufacturing 43 27 23
70 43 13 4 31 5.6
Banking 7 86 31 0 60 22 1 2 7.4
Accommodation and food 235 10 32
15 32 9 4 95 10.1
Food and beverages manufacturing 33 27 13
31 26 15 2 10 5.6
Insurance 17 29 23
-13 42 20 1 5 10.2
Agriculture 103 6 13
52 52 7 5 12 -
Pharma manufacturing 1 233 21
85 13 3 2 0 6.7
Textiles manufacturing5 7 18 20
315 265 155 25 37 5.6
Air transport 1 106 20 5 46 4 7 90 10.1
Note: Defensive interval ratio (number of days the reserved cash of a company would last in case of a total drop in income) to be factored in liquidity risk assessment as next step (part of financial KPI assessment)
1. Data derived from Eurostat for German companies 2017 – for sectors not covered by Eurostat, data from the German Federal Bureau of Statistics was used; 2. Extracted from Data Library of Professor Aswath Damodaran (NYU); Cash Conversion Cycle
and Solvency & Liquidity KPIs for Western European companies as of 2019; 3. Including independent artists; 4. Cash conversion cycle; 5. As no financial KPIs available for textile manufacturing, food and beverage manufacturing taken as proxy; 6. As no financial KPIs available for
administrative services, professional services taken as proxy; 7. Covers Mining and quarrying as well as the remaining manufacturing activities, i.e., manufacture of motor vehicles, trailers and other transport equipment, of machinery and equipment (incl. repair), of wood, paper,
printing and reproduction, of furniture as well as other manufacturing
Sources: Eurostat, Data Library Professor Aswath Damodaran (NYU), The Federal Statistical Office Germany, PWC, JP Morgan Working Capital Index McKinsey & Company 20Current as of April 3, 2020
Total COVID-19 stimulus package amounts to
EUR 750 bn
PRELIMINARY
Detailed on following pages Liquidity
enhancing Budget
Total stimulus package of German federal government measure in EUR bn Financing through new
Direct payments to 1. EUR 9,000 for companies with up to 5 employees 50 federal debt
small companies and EUR 15,000 for companies with up to 10 employees
solo-entrepreneurs The German stimulus package
Economic Stabilization 2. Loan guarantees to help companies refinance themselves
consists of both loans and
400
Fund (WSF)1 on the capital market (bridging liquidity bottlenecks) guarantees as well as direct
3. Direct government shareholdings to strengthen the capital payments
100
of companies (recapitalization) This brings up the total
4. Refinancing of KfW special loan program through credit 100 volume of the German
authorization federal budget by 36 percent
Support for hospitals 5. 3 compared to the originally
approved budget
Other Use not explicitly stated but likely to be spent in various areas 97
which require more government payments such as:
To finance the stimulus
package, a budget deficit of
6. Short-time work payments ("Kurzarbeit") EUR 156 bn was approved by
7. Unemployment benefits (Hartz IV) the Bundestag on March 25
2020
8. Child supplements in case of loss of income etc.
750
Note: Additional financial assistance provided by individual federal states (e.g. Bavarian relief program)
1. For large enterprises, systemically relevant companies (incl. critical infrastructructure), and selected start-ups
Source: German Federal Government, press research McKinsey & Company 21Current as of April 3, 2020
4. Applications for special KfW loans have
been high since their launch
PRELIMINARY
< EUR 3 mn Key insights
KfW COVID-19 loan applications EUR 3 - 10 mn
in EUR mn > EUR 10 mn • 19 large volume applications account
9,000
for 95% of the overall volume
8,662 (average volume of these large
381 applications: EUR 434 mn)
36
8,000
• However, most applications were likely
3,213 made by smaller companies –
3,000 2,900 1,163 out of 1,189 loans had a volume
of less than EUR 3 mn
2,000
8,245 • While the daily number of applications
Ø 1,762 for loans of less than EUR 3 mn has
1,271
been increasing steadily from 68 to
1,000 839 445 applications per day, most large
439 applications were made on day one
0 • First outlook: refinancing limit of
March 24 March 25 March 26 March 27 March 30 Total EUR 100 bn could be reached in CW
(first day)
Credit volume 25, assuming the average loan volume
< EUR 3 mn 68 118 244 288 445 1,163 of the past days will continue
EUR 3 - 10 mn 0 0 0 7 0 7 • According to press statements, loans
> EUR 10 mn 8 1 3 5 2 19 are aspired to be granted within 5
All volumes 76 119 247 301 447 1,189 working days for loans < EUR 10 mn
Source: KfW, press research McKinsey & Company 22Current as of April 3, 2020
6. Kurzarbeit: The Applications for Projected uptake in Kurzarbeit
in million persons
Kurzarbeit ("Anzeigen")1
rise in applications by month
4.8 – 7.23
in the last weeks are
indicating a
significant increase
1,300
Average per month 2019
in Q2 2020
PRELIMINARY
1,900
February 2020
476,000
March 2020 0.1
1. Presseinfo Nr. 19 der Bundesagentur für Arbeit
2. BA projections for January – March
3. Calculated based on the expected average number of workers per
"Anzeige". Industry sector specific numbers per "Anzeige" used, based on
Q1 20202 Q2 2020
2019 data. Impact in Q2 calculated based on expected demand shocks.
Source: Bundesagentur für Arbeit McKinsey & Company 23You can also read
