Germany is the largest economy in Europe and it has been very pivotal to the success of the European Union. However, the German economic situation is taking a new shape as data being released is showing slowdown. The economy has been flopping for months and the manufacturing sector has been declining steadily and a big recession might be around the corner. According to the economists, the German economy has been faltering and the current instability in the global markets is just adding more owes to the economy.
The GDP has contracted and this has raised a concern among many economists because the country might be headed to a recession. Just like Japan, Germany has a reputation of being one of the biggest automobiles producers and this makes a big section of the economy. This means that when the demand for cars drops, the German economy also suffers. German cars are losing their reputation as competitors offer better alternatives on top of the fact that German made cars are quite expensive. The new trend of the development of self driving and electric cars might have a big impact on the economy if the German automobiles makers don’t evolve to catch up with the competitors. The fate of the German automobile industry remains unknown and if the trend continues, the whole industry will be crippled to an extent where it will be impossible to reverse the situation.
The demographic changes in Germany might deny the country a significant amount of manpower and this will just add more problems to the economy. We have too many immigrants who are using a lot of resources without any input to the economy. The country also has a large number of elderly people compared to the young energetic segment of the population who can provide labor to the economy.
Right now the European union has a lot of challenges especially after the exit of Britain from the union and this is threatening the German manufacturing sector whose main market is the members of the European union. There have been many economic challenges and low interest rates introduced by the European central banks have not solved the financial problems. The UK was a very key pillar in the EU and their exit has raised the anti-European union sentiment and this raises the risk that more members will withdraw themselves and this can crumble the EU where Germany has a very big market. This is a big threat to the stability of the German economy and as of now many companies have a pessimistic outlook on the economy. This raises the chances of a economic recession for the first time since 2013 because we have more indicators suggesting that there might be an economic meltdown in Germany.
The manufacturing sector in Germany has also been hurt by the US-China trade war and this has made the exports fall and this has caused a contraction in the manufacturing sector as factories are now receiving fewer orders for their goods. This slowdown has also reached the German services sector and many companies providing various services have reported a decline in business conditions and this has made them very skeptical about any economic growth in Germany. Economists are saying that the German manufacturing sector is almost plunging into a recession zone and the ripple effect is also being felt in the whole economy. Its seems clear that a substainable economic recession is about to hit Germany.
There have been calls for extra financial stimulus to alleviate the economic condition and so far, the government has not seen any need for this. Globally, the economic performance has been slowing down while the US-China trade war continues to intensify. We also have a lot of trade tensions between the United States, European Union and also with the emerging markets. British has also left the EU without any elaborate agreement and this might have a huge impact to the economy because as a member of the European union, Britain used to buy a lot of German goods and this might not be the case anymore.
The German car manufacturing industries have been lagging behind in technology and innovation and if they don’t transition to the production of electric cars, the economy will be in a great danger. The vast German industrial areas might turn out to be lust-belts as the country faces a severe shortage of talented people especially in the IT sector. The China economy is also transitioning from the production of basic commodities to the production of high end tech products like autonomous vehicles and there is a high risk that Germany will lose this race to the Chinese. The Chinese economy relies on cheap vast labor from its massive population which is mainly what makes their products cheaper. If Germany does not take care, China will rise as a giant in automobiles production and this will bring a stiff competition to German companies which are already facing a lot of challenges. The rise of China in high-end areas is threatening the German economy. Numbers show that the demand for German made goods has declined globally and this is really hurting Germany as there is a global fallout in trade and this is drastically reducing the demand for German cars. On top of this, we have issues like global warming and this is reducing the demand of traditional German made diesel cars as more people are buying electric cars that have zero emission. This can cause a widespread employment since the automobile sector has employed hundreds of thousands of Germans and this can easily turn out to be the worse economic collapse that has ever been experienced in Germany.
Being an export economy, any trade wars and frictions in global trade will always affect Germany because it is more vulnerable as a leading exporter of luxury cars. A slowdown in international trade is the main reason why Germany’s economy is underperforming and any trade tensions between us, China and the EU will always undermine the performance of German economy. It is also important to note that China is the third largest buyer of German goods. In recent years, the Chinese economy has faced some challenges and the growth has already slowed down and in turn this has reduced the number of German made car sales in China. As s020 unfolds, Germany will have more worries as the trade wars and cuts in interest rates drive the global markets. Europe’s largest economy might find itself in a recession as things remain uncertain especially with the current outbreak that has disrupted global supply chains.
The banking system in Germany is in chaos, consumer consumption is dropping and with every passing week, things are getting worse. Germany is known as the economic powerhouse of Europe and the biggest locomotive producer in Europe but this might not be the case if the economic slowdown continues. The world’s fourth largest economy is in a difficult economic condition and the consequences might be felt even outside its borders. The stagnating economy of Germany will make the euro zone markets more unstable as members will tend to be more protectionists and this may destabilize the global trade even as the worse trade war between the United States and China continues to bite. This is already one of the most dangerous economic trend in 2020 as the German economy has already begun to destabilize. The industrial production numbers are awful and the output is dropping and a few months ago many companies slashed thousands of jobs and the automobile manufacturers are desperately trying to shift away from the high pollution diesel vehicles to electric cars. The financial sector is also in problems and banks like the Deutsche Bank are struggling to keep themselves alive and this has prompted them to cut thousands of jobs. Maybe it is a matter of time before Germany is called “the ailing man of Europe” and this economic collapse of Germany will have a profound effect globally.
This economic collapse in Germany is going to make the European Union very week than ever seen before because so for years Germany has been the biggest economy and very key to the success of the EU. Many countries within the European Union might also experience a mild economic disaster considering the fact that Germany is a big trading partner to countries like Italy where goods worth over 120 billion pounds flow within these two countries every year. Italy has been stuck with practically zero economic growth for the last two decades and the slowdown in Germany will hit Italy’s already weak economy and maybe this might trigger an economic recession in Italy.
German’s leading economists are expecting a big slowdown in 2020. This increase the pressure on the government to respond to this slow growth by taking more debt as a way of supporting the country’s spending. The laws in Germany limit the government when it comes to taking debts and demands that the politicians come up with a balanced budget. However, the economists are arguing that the government has to launch some economic stimulus programs as a way of bringing a new wave of economic boom but despite this intervention by the central banks, an economic collapse might be coming to Germany. The economy is in a very bad condition with exports declining, jobs being slashed and consumer consumption declining and it might be a matter of time before the truth becomes a reality in Germany. On top of Germany we also have other countries like China, Japan, and South Korea which have slowing economies. It is impossible have bloated economies forever. Who knows the economic collapse in Germany might trigger a global recession.