Aerial view of containers at a loading terminal in the port of Hamburg, Germany. File photo/Reuters
Berlin is set to further lower its economic growth forecast on Wednesday as Europe’s largest economy cools off, but ministers are unlikely to bend to foreign demands to boost activity with extra government spending.
According to media reports, the German government will unveil figures predicting gross domestic product (GDP) will increase by just 0.5 per cent this year.
The downgrade, if confirmed, comes after economy minister Peter Altmaier in January announced expectations of just 1.0 per cent expansion in 2019, knocking 0.8 points off an autumn forecast.
Global factors including slowing trade, Brexit and US President Donald Trump’s commercial confrontations with Europe and China have hit the eurozone powerhouse particularly hard.
And a string of local one-off factors were blamed by economists for throttling expansion.
In the vital car industry new emissions tests proved a bottleneck for manufacturers, while a harsh drought lowered water levels in the Rhine river, a key waterway for firms in sectors such as chemicals.
But more structural challenges are also present, including an ageing population and a chronic lack of public investment in infrastructure and high-tech innovations.
The International Monetary Fund in its April economic outlook repeated its long-running call for Germany to spend its way out of a downturn.
To avoid the German slowdown contaminating the rest of the eurozone, “the available fiscal space can be used to increase public investment in physical and human capital or reduce the labour tax wedge,” the IMF judged.
The Washington-based fund also slashed the country’s growth forecast to 0.8 per cent, in line with domestic bodies such as Berlin’s “Wise Men” council of economic advisers and leading think-tanks.
More money, more problems
So far the Chancellor Angela Merkel’s government has fended off demands from abroad to loosen its purse strings.
“We are not in a recession, our growth is slowing,” finance minister Olaf Scholz said at a G20 meeting in Washington last week.
Germany’s fall to earth began late last year, after growth had hit the — for western Europe — comparatively breakneck pace of 2.2 per cent in 2017.
After a contraction of 0.2 per cent in July-September, the next three months brought zero growth — allowing Germany to just escape a “technical recession” or two successive quarters of shrinkage.
Across the whole year, the stumbling second half was enough to slow expansion to 1.4 per cent.
In Washington, Scholz said “we did already what everybody is asking us,” with “a very expansive investment strategy” in infrastructure, education, the digital economy and the “Energiewende” or transition to renewable energy generation.
IMF European Department chief Poul Thomsen acknowledged the increase amounted to some 0.7 per cent of GDP, but said “we need to see more and keep it coming.”
A year of two halves?
Looking in more detail at the rest of 2019, most of the acute problems have faded but economic indicators now point in different directions, puzzling observers.
Anaemic factory orders and production data stand in opposition to rising business and investor confidence, while the mood among the public remains buoyant thanks largely to unemployment at its lowest since the country’s 1990 reunification — 4.9 per cent in March.
“The German economy remains a mystery,” said economist Carsten Brzeski of ING bank, highlighting a stark contrast in Europe’s powerhouse.
Weakness in export-oriented manufacturing firms is “reflecting the global slowdown as well as increased global uncertainty,” he said, while services firms’ strength “reflects the sound domestic fundamentals.”
But in recent days “the reversal of last year’s one-off factors, some encouraging recent evidence from global activity as well as continued solid domestic fundamentals have again brightened the outlook,” Brzeski said.
When those effects begin to be reflected in harder economic data, “it could be time for first (tentative) upward revisions” to forecasts, he suggested.
For its part, the European Central Bank expects a rebound in the second half of the year for the 19-nation eurozone.
German investor morale improved for the sixth month in a row due to a resilient global economy and a delay to Britain’s departure from the EU, a survey showed on Tuesday, but the growth outlook for Europe’s largest economy remains clouded by external risks.
BERLIN: Dutch central bank Governor Klaas Knot expects the eurozone economy to recover speed in the second half after a sluggish start to the year, but in an interview with Handelsblatt the noted hawk was distinctly dovish on long-term interest rates. Knot, one of the most prominent hawks on the European Central Bank’s rate-setting committee told the German paper
As the United Kingdom grapples with its Brexit drama, the uncertainty around its decision to leave the EU persuaded Dale Carr to close down her Berlin shop selling British goods. The 67-year-old from Sheffield and her husband Robin in 1996 opened “Broken English”, a shop selling British goods to homesick expats and Germans with a taste for UK treats in the trendy district of Kreuzberg.
Smart Dubai has successfully completed phase one of the UAEPASS initiative – its nation-wide programme for digital identity – integrating seven leading government entities to date. This allows citizens, residents, and visitors in the emirate to seamlessly access these entities’ services via smartphones,
With less than 19 months left for the inauguration of the Expo 2020, its organisers have further speed up the pace of allocating contracts to thousands of local and foreign firms to ensure timely preparation of the event, which is set to be the largest of its kind in the Arab World.
Aviation in India has attracted entrepreneurs like moths to a flame but only a few have managed to survive and thrive in a sector which has become the graveyard of all kinds of airline business models − budget, full service and hybrid. Kingfisher was one of the biggest private initiatives but it failed.
The Bank of Japan (BOJ) is expected to forecast this week that inflation will remain below its 2 per cent target through the fiscal year that ends in March 2022, sources say, a sign its massive stimulus will stay in place for the foreseeable future.