• Germany's news in English
 

Analysts: German downturn won't last

Published: 13 Jan 2013 09:10 GMT+01:00

For a long time, Germany managed to remain immune to the economic difficulties plaguing many of its closest neighbours thanks to the deep and painful structural reforms it undertook years earlier.

But it, too, has started to feel the pain from the crisis, according to a whole range of different data published in the later months of last year.

"The difficult international environment was a noticeable burden on the German economy," the Economy Ministry wrote in its latest monthly report on Friday, citing "substantial uncertainty arising from the euro area debt crisis" as well as other factors such as budget problems in the United States.

"Together with weakening demand for German exports, this is also hurting companies' investment plans. As a result, the growth momentum has slowed over the course of the year. Available indicators point to a noticeable contraction in economic output in the final quarter of 2012," the ministry said.

"Germany is an open and integrated economy so it is not surprising that a slowdown in the rest of the euro area has an impact here," European Central Bank chief Mario Draghi said in November.

German growth has indeed been slowing throughout last year: from 0.5 percent in the first three months to 0.3 percent in the second quarter and 0.2 percent in the third.

Official fourth-quarter gross domestic product (GDP) data are scheduled for release on Tuesday. And economists are pencilling in a contraction from anywhere between 0.2-1.0 percent.

Economy Minister Philipp Rösler has already begun to prepare the markets for a contraction, warning of "weaker-than-expected" output and overall annual growth of 0.75 percent for the whole of 2012.

That is a long way from the buoyant growth of 4.2 percent and 3.0 percent that Germany notched up in 2010 and 2011 respectively. But it is also equally far from the 5.1-percent contraction seen in 2009.

Traditionally, German exports have been the main driver of growth, but they have also made the economy vulnerable to downturns in neighbouring eurozone countries.

In November, the value of German exports amounted to €94.1 billion, down from €98.4 billion in October.

ING Belgium economist Carsten Brzeski said it would "take a miracle" for Germany to avoid posting a GDP contraction in the fourth quarter of 2012.

Nevertheless, economists are confident that such a contraction would not be repeated in the first quarter of 2013, meaning Germany would successfully skirt a recession, which is technically defined as two consecutive quarters of declining GDP.

"The outlook will quickly brighten again," said the DIW research institute. The Economy Ministry thought so, too." Overall, the German economy is still very competitive and in good health," it said, pointing out that unemployment which is still close to historical lows will help buoy domestic demand.

Furthermore, with German-made goods still in demand outside the euro area, exports are unlikely to collapse completely.

"Given favourable sales prospects, companies will start to invest again, not least because of the very attractive level of interest rates at present," said DIW economist Simon Junker.

UniCredit analyst Andreas Rees was similarly confident that the outlook for 2013 was "considerably brighter."

The government, for its part, is pencilling in growth of around 1.0 percent for the current year.

AFP/jlb

The Local (news@thelocal.de)

Your comments about this article

10:10 January 13, 2013 by Englishted
There is too much book cooking with the unemployment figures to be used as any form of guide,and interest rates have been low in the €uro zone but there is no investment or growth in most countries.

Joseph Goebbels's legacy is still in place with none questioning German press.
10:39 January 13, 2013 by Dalmation
Just impose more austerity on the poorer countries and Angie might be able to put a spin that all is OK in Germany until the next election. The reality of the fact is Germany escaping recession so far is a lie. One only has to look at the amount of 400 EUR jobs filling the workplace as well as internships providing employers with very cheap labour. This results in a cycle that Germans have far less spending power than before. The only thing that saved Germany up till now was the weak Euro as opposed to the strong DM. Now those days are coming to an end. I am afraid Angie, you won't be able to click your heals this time to return from the land of Oz. Reality is really biting. You can only hope the German electorate don't call your bluff until after the election.
10:42 January 13, 2013 by smart2012
Ops, did not we say this one year ago? And Verkel + Bild kept saying Germany can stand alone? Germans, get rid of her, otherwise she will bring us to a disaster.. And believe less at Buba, which also played inflexible and one sided role on all of this.
Today's headlines
School hotpants ban sparks online debate
Photo: DPA

School hotpants ban sparks online debate

A school's decision to ban hot pants for girls during the July heatwave has sparked anger online, with feminist activists decrying the decision as sexist. READ  

Greece crisis
Merkel to meet Tsipras at Tuesday summit
Over 60 percent of Greeks voted 'No' in the referendum. Photo: DPA

Merkel to meet Tsipras at Tuesday summit

UPDATE: Chancellor Angela Merkel is to meet Greek Prime Minister Alexis Tsipras at a eurozone summit on Tuesday to discuss new Greek reform proposals, Greek government sources said. READ  

Students fight for life after chimney plunge
The Düsseldorf Kunstakademie (Academy of Arts). Photo: DPA

Students fight for life after chimney plunge

Two students had to be rescued by fire services after falling 30 metres down a chimney at the the Dusseldorf Academy of Arts on Sunday night. READ  

Lion cub raised in living room leaves home
Zookeeper Isabelle Wallpott with Malor. Photo: DPA

Lion cub raised in living room leaves home

Malor has lived at home with a zookeeper in the Eifel mountains for the last five months. Now the little lion cub is about to be reintroduced to his mother. READ  

July heatwave
Bavarian town roasts in record temperatures
A farmer waters strawberries near Kitzingen in Lower Franconia. Photo: DPA

Bavarian town roasts in record temperatures

The small town of Kitzingen in Bavaria registered a new record temperature for Germany, as the mercury reached 40.3 C on Sunday. READ  

Having kids later makes for a happy family
Children make us happy, but only up to a point. Photo: DPA

Having kids later makes for a happy family

Children are a blessing? Only for parents over a certain age, and then only up to a certain number, a study published by a German research institute shows. READ  

Greece crisis
How will Germany react to the Greek vote?
Angela Merkel has some more sleepless nights ahead of her. Photo: DPA

How will Germany react to the Greek vote?

Now that Greeks have voted against accepting tough austerity conditions in return for a fresh tranche of bailout cash, The Local asked Professor Michael Wohlgemuth of Open Europe Berlin how Chancellor Angela Merkel, other political leaders and the German public may respond. READ  

Post strike ends Monday as agreement reached
Photo: DPA

Post strike ends Monday as agreement reached

Public sector union Verdi has reached a final agreement with Deutsche Post after a strike that lasted four weeks, meaning postal service should return to normal starting on Tuesday. READ  

Women's World Cup
Löw defends Neid as critics circle after defeat
Silvia Neid congratulates England after Germany's 1-0 defeat. Photo: DPA

Löw defends Neid as critics circle after defeat

World Cup winning coach Joachim Löw defended his female counterpart Silvia Neid on Monday after Germany fell to a surprise 1-0 defeat to England in the third place play-off of the Women's World Cup. READ  

Hamburg districts make UNESCO heritage list
An eightfold composite picture of different views of the Chilehaus (Chile House) and the Sprinkenhof in Hamburg. Photo: EPA/Christian Charisius/dpa/picture alliance

Hamburg districts make UNESCO heritage list

The UN cultural agency on Sunday designated Hamburg's historic maritime warehouse and business districts, boasting early 20th century German brick architecture, as World Heritage sites. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Gallery
Police seize pensioner's WW2 heavy weapons haul
National
How to survive the Europe-wide heatwave
Sport
Is Schweini already out of the door at Bayern?
Politics
How German media shaped the Greece crisis
National
Car assembly robot crushes worker at Volkswagen
Rhineland
Weathermen red-faced over heatwave snow warning
Society
An eye for an eye? Mum protects child in playground with pepperspray
National
As it happened: Queen Elizabeth's final day in Germany
National
As it happened: Queen Elizabeth's second day in Germany
National
Queen Elizabeth II's first day in Germany - as it happened
National
Bus passengers tell fake racists where to get off
Politics
What's really in the Queen's handbag?
National
Germans say USA doesn't respect freedom
National
Yes, you CAN buy adult e-books before 10pm in Germany
VIDEO: Watch a 93-metre turbine crash to earth in slow motion
Gallery
Who's got a shot at the German Film Awards
Rhineland
Anger over 'child-free' beer garden
National
How do you do, Majestät?
National
Man defends right to pee in public with tear gas
Features
The Germans who won Waterloo for the British
Frankfurt
Should Germany ban circus animals?
Hamburg
Where people are having the most sex in Germany
Culture
Who Wants to be a Millionaire? Not this student...
National
Dresden's three-decade-long red light
Politics
Upper house calls for gay marriage now
Berlin
Berlin named 3rd-best city worldwide
Sport
In search of the toughest firefighter
Business & Money
German firms shine for European engineering students
Gallery
Hitler's paintings up for auction
National
German's 70-year search for murdered US pilot
Politics
What the G7 leaders agreed at Elmau
Business & Money
What really makes Germans happy
National
Playmobil builder leaves worldwide legacy
National
The car share that became a drug run
Politics
What Snowden revealed to Germany
Rhineland
Why wolf cubs are being raised by hand
National
Hitler's booze cave found
National
Environment makes Germany worth living in
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

6,912
jobs available
Toytown Germany
Germany's English-speaking crowd