The 2013/01/08 at 08:35
Marie Luginsland, in Germany
While 2012 concluded with a few signs of economic weakness in Germany, mainly related to a slowdown of automobile production, 2013 is getting off to an optimistic start. All German economic institutes have scaled their forecasts upwards and are backing up to 0.8 % growth for the New Year. True, this rate is far off the score of 3 % obtained in 2011, but after 0.7 % growth in 2012, Germany thus marks a slight recovery. Satisfactory enough for it to position itself at the head of European countries. According to the IMK (Institut für Makroökonomie und Konjunkturforschung) in Düsseldorf, Germany is the only Eurozone country to be able to envisage such an increase. France follows in second place, with German economists foreseeing its GDP making a slight recovery of 0.5 % (compared with 0.2 % in 2012). The European Union’s two key economies thus confirm their positions at a time when the recession is expected to strike the whole of the Eurozone with a global GDP drop of 0.5 % in 2013 (-0.4 % in 2012).
A fragile position
On top of this, German economists estimate that German exports will benefit in coming months from the euro’s weakness. Following a 1 % rise in 2012, export prices are expected to increase by only 0.3 % this year. With international markets outside the Eurozone driving them to become more competitive, German businesses can also expect to benefit from the economic recovery of the main countries where their products are headed. In this way, still according to IMK figures, Brazil is to see its GDP go up by 4 % this year compared with 1.5 % in 2012. China, after 7.5 % in growth in 2012, can expect a 8.5 % rise this year. Recovery is also on the cards in India, where the GDP should climb by 6 % after 4.5 % in 2012, as well as in Russia, a country where growth is to remain constant in 2013 at 3.8 %.
These prognostics are nevertheless tempered by Volker Treier, Director of the Foreign Trade Department of the DIHK (federation of German CCIs), who comments that “our businesses may certainly continue to make their mark on international markets despite a difficult economic situation, but we deplore a mounting of barriers to export affecting their activity”. In this way, according to a survey carried out at the end of 2012 amongst members of the 80 German CCIs, 59 % of businesses estimated that export conditions had deteriorated in the last two years. These difficulties most commonly manifest themselves in disguised protectionist measures, ranging from a recycling tax on vehicles imported by Russia, to an increase in customs duties on textiles and clothing in Turkey, or the 86 new import standards imposed in Indonesia on steel, ceramics, textiles and batteries!
Similarly, in Latin America, while agreements create links between the European Union and certain countries such as Peru and Colombia, the DIHK points out that “70 % of its members who export to Argentina and over 50 % of those active on the Brazilian market denounce increasingly difficult conditions for German businesses.”
However, German dynamism on these markets and in developing countries, namely Angola and Ghana, as well as a recovery of the US economy, should allow German businesses to make up for the slowdown of their activity due to austerity policies in most Eurozone countries.
According to forecasts by economic institutes such as the IMK, countries in the south of Europe will continue their plunge in 2013, with production dropping by 3 % in Italy, by 1.8 % in Spain, and by 5 % in Portugal. Only Greece is expected to experience a slight slowdown in the fall of its GDP, expected to drop by 4.2 % (compared with -6% in 2012). But beyond these regions, the recession will also affect the Netherlands (- 1%) whilst Belgium can expect a drop in its GDP equivalent to its 0.2 % decline of 2012.
These new drops do not fail to worry German economists, as the Eurozone remains the destination of almost 40 % of German exports. “The situation remains fragile and businesses as well as individuals will remain uncertain about the end of the crisis and continue to invest little,” believes Gustav Horn, Scientific Director at the IMK.
A recovery of imports
Already in 2012, as noted by the IMK, gaps had widened within the European Union. While German exports to France and Great Britain rose respectively by 4 % and 11.5 % during the first nine months of the year, they fell by over 10 % towards Portugal, Spain and Italy, and by almost 9 % towards Greece. This trend is expected to continue this year.
However, without reaching the 4.1 % rise attained in 2012, German exports will continue to grow by 3.5 % this year. All the same, while exports remain a key pillar of German growth, foreign trade is to lose speed in the face of imports, which are to increase in similar proportions.
This new dynamic observed by the economists confirms the recovery of German domestic demand, long held back by the stagnation of income. The rise of salaries in the metallurgy and chemicals sectors last year, as well as a drop in unemployment, has contributed to boost consumption in Germany. This trend is to continue in coming months. Indeed, the German Minister for the Economy has recently announced that the number of unemployed persons should remain below three million in 2013, in other words an unemployment rate of 6.8 %.