Germany Economy: 2009 Forecast Predicts Catastrophic Exports, GDP Contraction
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Berlin, 8 April, 2009 The outlook for Europe’s largest economy is nothing less than catastrophic. For an economy that has been historically strong, never contracting more than 1% a year since World War II, the Commerzbank forecast that it would shrink 7-9% in 2009 is not encouraging.[br]
Berlin, 8 April, 2009 The outlook for Europe’s largest economy is nothing less than catastrophic. For an economy that has been historically strong, never contracting more than 1% a year since World War II, the Commerzbank forecast that it would shrink 7-9% in 2009 is not encouraging.[br]
Since World War II, the German economy has made incredible strides forward, and the government has invested heavily in manufacturing and other sectors, placing the economy fifth in the world and ahead of all others in Europe.
The current GDP (PPP) of Germany is 2.863 trillion, making it smaller than India’s and larger than the UK’s. In the face of the recession, the fact that the economy is largely export-led is damaging, as there is weak demand overseas.
Industrial orders slipped 8% in January, and output dropped 7.5% then. “Many manufacturers, distributors, and vendors are trying to cut inventory by not ordering new goods,” commented Hiroko Mirafiori, correspondent for EconomyWatch.[br]
“This helps them cut costs by having less capital tied up in storage and inventory but it really hurts their suppliers. The lack of consumer demand is eating it way up the entire supply chain,” she added.
German Economy Minister Karl-Theodor zu Guttenberg said, “The low point has by no means been reached this year,” at a news conference in Berlin.
Germany had forecast a drop of 2.25% in their economy. Finance minister Peer Steinbrueck added that the country certainly could not stick to that prediction anymore. Germany is due to update its growth figures in May.
Guttenberg indicated that fiscal measures could be taken before the elections this September. Amendments to the nation’s corporate tax structure would help alleviate some of the losses expected in coming months.
‘I personally believe that is an aspect that can be presented during this legislative period,’ Guttenberg said.
Among the tax breaks would be allowing companies to write off interest payments more easily, as well as the loosening of Gewerbesteuer, which is a local trade tax.
Najib de las Cruces, EconomyWatch.com
