German Exports Likely to Shrink Next Year, First Since 2008 Global Financial Crisis: DIHK
Sat, April 10, 2021

German Exports Likely to Shrink Next Year, First Since 2008 Global Financial Crisis: DIHK

German exports are likely to shrink next year for the first time since the 2008 to 2009 global financial crisis. / Photo by Александр Медведков via 123rf

 

German exports are likely to shrink next year for the first time since the 2008 to 2009 global financial crisis, states the DIHK Chamber of Industry and Commerce, which is the central organization for 79 Chambers of Commerce and Industry in Germany. All companies registered in the country, except free professions and farms and handicraft businesses, are required by law to join a chamber. The DIHK represents all commercial enterprises in the country.

 

German export expectation

As cited by Reuters, Germany is struggling because of the slow global market. This is a challenge to the country as it has the largest economy in Europe and the fourth-largest by nominal GDP worldwide. DIHK shared that the export-reliant country was affected by the trade disputes and global slowdown caused by the United States’ foreign policy America First. In such a policy, US President Donald Trump has increasingly undermined international trade law and advocated the use of tariffs to put the US first in the global trading system.

Germany’s economy was also affected by business uncertainty connected to Britain’s plan of leaving the European Union. This is referred to as Brexit (British exit). If the UK leaves, it would the first member state to ever withdraw from the economic and political union involving 28 European countries.

DIHK President Eric Schweitzer said that it is a “huge challenge” for their economy, considering its “strong industrial core.” Germany’s export expectation was based on DIHK to an industry survey they conducted with about 28,000 German firms and its managers. The organization said that the annual export growth of Germany is likely to shrink to 0.3 percent in 2019 from 2.1 percent last year. It also forecasted that the country’s exports will decrease by 0.5 percent in 2020.

 

The need to implement a corporate tax rate

Schweitzer went on to say that ever since the global financial crisis, they have not received such a pessimistic view from the German managers. Normally, the average export growth rate in Germany is at 5.5 percent. The DIHK President has also called on the government to implement a corporate tax rate that is “internationally competitive.” He proposes a 25 percent corporate tax rate and also demanded the need to invest in the country’s infrastructure.

 

The DIHK President has also called on the government to implement a corporate tax rate that is “internationally competitive.”  / Photo by convisum via 123rf

 

Economic trouble in Germany

The slight increase in Germany’s GDP growth next year is attributed to the fact that there will be four more working days in 2020 than this year. Reuters has also recently highlighted that the unemployment rate in the country increased in October more than what the government is expecting. The crisis that the manufacturing industry is experiencing has affected the labor market, which, in effect, could slow down the country’s consumer spending. This is a “sign of economic trouble” because even a little downturn in consumer spending can create damage to the economy. 

The Federal Labour Office of Germany has released data, showing that the number of unemployed people grew by 6,000. The unemployment rate is at 5.0 percent, which is slightly above the previous 4.9 percent rate. Nevertheless, the Federal Labour Office head Detlef Scheele said that the job market in Germany “still proves to be robust.”

Meanwhile, English weekly The Spectator also noted how the “ailing economy” of Germany could also impact the Brexit negotiations. The new services sector of Germany has also fallen for the first time in five years and its neighboring countries are looking “in horror” as to what it could mean for them. The Chancellor of Germany Angela Merkel is also expected to visit India to bolster trade cooperation. She will hold talks with Prime Minister Narendra Modi and is expected to sign deals that will promote cooperation in some areas, including artificial intelligence, urban mobility, and sustainable development.

The German Foreign Minister Heiko Maas has described India to be South Asia’s “pillar of stability.” Johann Wadephul, deputy leader of the joint parliamentary party of Merkel, also said, “As the world's largest democracy, India is a natural partner for Germany within this larger alliance.”

 

 

Trade-in goods and services forecast

In another forecast by The Organisation for Economic Co-operation and Development, which is an intergovernmental economic organization with 36 member countries founded to stimulate economic progress and world trade, it noted the annual growth rate of the following counties in terms of imports and exports annual growth rate:

Germany: (Imports: 3.3 percent, Exports: 2.4 percent)
United Kingdom: (Imports: 1.6 percent, Exports: 1.3 percent)
United States: (Imports: 3.4 percent, Exports: 2.4 percent)
Korea: (Imports: 3.8 percent, Exports: 3.4 percent)
India: (Imports: 9.0 percent , Exports: 6.3 percent)
Turkey: (Imports: 5.0 percent, Exports: 3.5 percent)
Greece: (Imports: 3.8 percent, Exports: 3.1 percent)

The trade-in goods and services forecast above is OECD’s projected value of change in ownership of services and material resources between one economy and another. They based their projections on the assessment of the economic climate of individual countries as well as the world economy. The data considered included net trade, export market growth, and imports and exports.

As Germany is possibly heading for a recession, the eurozone is also growing anxious. The country’s strength, being one of the largest exporters globally, appears to also drag it down in times of trade tensions.