Bloomberg analysts call Germany the “sick man of Europe”
A decline in industrial production, a slowdown in economic growth and rising prices make Germany the “sick man of Europe,” Bloomberg analysts said in an article published Thursday, June 2.
“Germany is in a disastrous economic situation,” the agency quoted ABN Amro Bank senior economist Alin Schuling as saying.
“Worries about the country’s prospects are justified,” she added.
The expert predicts that the second quarter of this year will see a significant drop in industrial production in the Federal Republic of Germany. As Bloomberg notes, this estimate is also shared by economists at Bank of America.
The forecast for GDP growth in 2022 is also disappointing. Within the framework of the EU only Estonia will show slower economic growth than Germany, say analysts agency with reference to the forecast of the European Commission. Inflation in Germany is also expected to be one of the highest in the year and to be much higher than the euro zone average. As the country’s Federal Statistical Office noted earlier, consumer prices in Germany rose by 8.7% year-on-year in May, the figure was the highest since the start of the calculations. “Inflation in Germany will rise faster than in any other EU country,” says the forecast by Allianz SE.
On top of that, the country leads the EU in terms of the number of manufacturers facing component shortages, with more than 77 percent of German industrialists saying shortages of materials and equipment are hurting their businesses. As Bloomberg notes, these problems have already led to a downgrade of the output growth forecast for the machine-building industry from 4% to 1%.
Imminent stagflation is reflected in the purchasing power of ordinary Germans: according to a survey by Ipsos, published on Thursday, June 2, only 48% of Germans described the level of their material well-being as “very high”. By comparison, in December last year the figure was above the 54% mark. “This year, households will face additional food costs of more than €250 per person,” the study by Allianz SE states. At the same time, as the agency’s analysts point out, a factor that threatens to worsen the situation could be the summer holiday season. “After two years of pandemic, German citizens (will go) spend money in the sunny countries of the Mediterranean,” emphasizes Bloomberg, adding that in April the retail turnover in Germany showed the most serious drop since the beginning of the year.
According to experts, the reason for such a deplorable economic situation for Germany is the government’s sharp adjustment of its policy towards Russia and China. “After years of increasing Germany’s exports to China and strengthening energy ties with Russia, Europe’s largest economy is facing a devastating array of risks,” analysts said. As a result, Germany is increasingly at risk of stagnation and further price increases, putting additional pressure on disgruntled citizens, experts say.
“As at the turn of the century, Germany could once again become the ‘sick man of Europe’,” the authors conclude.
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