Germany’s economy is getting hit by the rest of the world’s problems

German
football supporters watch the 2010 FIFA World Cup semi final
match between Germany and Spain at a live public viewing on a
large screen monitor at FIFA Fanmeile on July 7, 2010 in Berlin,
Germany.
Matthias Kern/Getty
Images

 

A US trade war, Brexit,
Italy — you name it, Germany’s economy is
suffering from it.

Europe’s economic powerhouse is
in one of the longest boom phases of the postwar period, but it’s
being pounded by a cocktail of international events
that ING
Economics says is casting doubts on future
growth. 

Germany’s Council of Economic
Experts also paints a not-so-rosy picture: It expects 1.6% growth
for the country this year and only 1.5% in 2019, well below
expectations and down from a bumper 2.2% in 2017. Geopolitical
issues were at the forefront of the council’s findings.

“The uncertain future of the
global economic order and demographic change present the German
economy with major challenges,” chairman of the Council of
Experts, Christoph M. Schmidt, said in a
report published on November 7. “That is why we are faced
with important economic policy decisions.”

Trade war fears, ongoing Brexit
negotiations, and the continued crisis surrounding Italy’s budget
are all dragging on the German economy. That’s not
all: 
“Temporary
production-related problems and capacity bottlenecks are
dampening the pace of expansion,” the report said.

Europe’s largest exporter has
also seen trade out of the country fall dramatically, with
exports dropping 0.8% month-on-month in September. Exports could
continue to suffer in the event of a no-deal Brexit or new
tariffs on autos out of the US as part of US President Donald
Trump’s trade war. Export numbers dropped in four of the last six
months and business confidence has been waning as investment
opportunities weaken on geopolitical uncertainty, ING
said.

Automakers are suffering, too

Germany’s malaise dampened the
results of auto giants such as BMW.
Third-quarter operating profit plunged 27% as the industry
faces greater competition in global markets. The
Financial Times reported on November 7 that new EU
greenhouse-gas emissions targets for automakers — the EU seeks to
reduce emissions by 30% — are behind a 0.1% contraction in
Germany’s GDP in the third quarter as car companies struggle to
adapt. 

In addition, potential Trump
tariffs on China are a major issue for Daimler and BMW, which

both build SUVs in the US for the Chinese market.

Research from UBS says that
economic risks are predominantly external, but warn that
deteriorating labor market conditions could have an impact. The
country’s aging population could also prove to be problematic
going forward unless more immigration and improved working
flexibility are encouraged across the German economy, according
to the Council of Experts.