German firms’ earnings expectations sour

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Sentiment among German companies have turned pessimistic due to the combined effects of the new coronavirus disease 2019 (COVID-19) pandemic and the uncertainty in the incentives and stimulus packages.

A survey conducted by the German-Philippine Chamber of Commerce and Industry (GPCCI) between June 5 and 12 showed the number of companies expecting the decline of sales by more than 50 percent doubled to 26 percent from its April survey while the businesses anticipating a decline between 25 percent and 50 percent grew by a quarter to 30 percent.

In the survey conducted last April, 18 percent of the companies still anticipated no change in sales, this number slumped to 2 percent.

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The GPCCI said while they expect a massive decline in their economic activities due to COVID-19, the group believes a strong stimulus package, the reduction of the Corporate Income Tax, and cutting red tape will help to boost the economy.

More than half (55 percent) of the respondents have cited postponement of investments as the top concern followed by problems in the supply chain and logistics (54 percent).

Cancellation of scheduled trade fairs / events gained importance (54 percent) compared to last April.

Travel restrictions remain the most named effect of pandemic restrictions (84 percent).

A quarter of the participants are expecting supply chain operations to recover by September 2020. Only 43 percent of companies foresee this by the end of the year, while 30 percent anticipate recovery only by June 2021.

About 47 percent of the companies consider the easing of the quarantine as moderately helpful while only 39 percent consider it very helpful.

An overwhelming majority of 71 percent believe a reduction of administrative burdens is a key government support measure. This was followed by the passage of economic stimulus packages (59 percent) and corporate income tax reductions (53 percent).

“The survey clearly shows the enormous effect of COVID-19 on companies,” said Tristan

Arwen Loveres, GPCCI president. “We encourage all stakeholders to get the proposed economic stimulus packages quickly approved to mitigate the negative impacts on the economy.”

Martin Henkelmann, GPCCI executive director said companies quickly need huge support to tackle these ,trying times and to emerge more competitive on the international level afterwards.

The survey had 87 respondents.

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