Burden of War and Pandemic: Uncertain Times for the Middle Class

Status: 02/05/2022 1:47 p.m.

The consequences of the war in Ukraine are increasingly affecting medium-sized German companies. The pandemic continues to cause a tense economic situation, as shown by a survey by the public bank KfW.

Many medium-sized companies are already feeling the economic consequences of the corona pandemic and the war in Ukraine. This is the result of a representative survey by the Frankfurt-based public development bank KfW. After that, there are more and more delivery bottlenecks in the world, which endangers the foreign business of many companies.

According to the survey, almost every second average company in Germany suffers from such bottlenecks. Construction companies and industrial companies are particularly affected, but also, for example, the retail trade. Some companies therefore cannot meet delivery deadlines or have to refuse orders, but most of them retain their employees.

“Stressed supply chains”

According to KfW chief economist Fritzi Köhler-Geib, the fact that the closures in China under the zero Covid strategy are causing logistical problems at ports and transport companies in the global trade in goods obviously plays a major role – of all things at once when demand increases: “It also means that supply chains are under stress”, explains the economist.

Direct economic ties with Russia and also with Ukraine in German medium-sized companies are relatively weak. According to KfW, far fewer medium-sized companies depend on the particularly scarce raw materials and preliminary products from China and Russia. “But you also have to take into account that the sword of Damocles of a gas embargo or a gas supply freeze currently hangs over all developments,” says Köhler-Geib. Rising energy prices were an additional burden. As a result, a quarter of companies pass these costs on to customers and raise prices.

Uncertain outlook – companies in the “staccato” phase

It is difficult for KfW experts to estimate the development of international trade this year. It depends, for example, on how long supply chains remain disrupted and what sanctions are still imposed in connection with the war. The mood in medium-sized companies and also in large companies is suffering from this enormous uncertainty about the final impact of the war in Ukraine and Western sanctions on the economy.

Federal Economics Minister Robert Habeck sees German companies in a kind of “staccato” phase during the war. High energy prices are a burden, there is a lack of skilled workers and supply chains no longer work properly. “That means it doesn’t work properly anymore, but there are still raw materials, then it’s produced, then it’s broken,” said the green politician in Berlin after consultations with more than 40 associations of small and medium-sized enterprises, including crafts, logistics and energy. The federal government had recently announced aid to the most affected businesses.

With information from Ursula Mayer, hr

KfW survey of medium-sized companies

Ursula Mayer, HR, 2022-05-02 1:26 PM

Leave a Comment