The German export machine is in danger of stopping, businesses could suspend investment and consumers could limit their consumption, according to estimates by the German “BSE”.
“The economic prospects for Germany look very bleak,” Siegfried Russwurm, president of the Federation of German Industries (BDI), told Deutsche Presse-Agentur. “Corona easing is not giving the economy the expected growth bonus this spring,” Russwurm said.
Due to high uncertainty and new supply difficulties hampering production, the BDI has avoided issuing current economic forecasts. Economic research institutes have recently significantly reduced their forecasts. According to economic experts, Europe’s largest economy could be threatened with an economic downturn if the conflict escalates and Russian energy imports are cut off.
According to the BDI, it is predictable that the consequences of the war will slow down global economic growth and economic recovery in the euro area. The German export “engine” is likely to stumble due to global growth losses and sanctions. German companies’ investment in machinery and other equipment may remain stagnant in 2022.
“Whether and to what extent uncertainty will also affect the purchasing decisions of private households is open due to a lack of historical experience,” the current BDI quarterly report said. However, the sharp rise in energy prices, which fuels inflation as a whole, has caused significant losses in purchasing power. According to the BDI, private consumer spending will increase slightly this year. Higher inflation weakens the purchasing power of consumers, because they can then buy less for one euro than before.
Russwurm demanded: “The ruling coalition must now safeguard the economic strength of Germany and its businesses and work for rapid, effective, targeted and interim measures to alleviate the crisis.” For example, the federal government should provide temporary support to companies “that have run into financial difficulties through no fault of their own because of energy prices”. According to the Ministry of Economy, the federal government is currently working “at full speed” for a package of assistance to companies affected by the effects of the war in Ukraine.
Source: Capital
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