German industry still waiting on post-virus boom amid shortages

Germany was yet to see any signs of a "post-coronavirus boom", the head of the influential BDI industry lobby said Thursday, as persistent supply chain issues weighed on the economy.

Cargo ships dock in Bremerhaven.
Cargo ships dock in Bremerhaven. Photo: picture alliance/dpa | Sina Schuldt

Bottlenecks which have plagued manufacturers in Europe’s largest economy through 2021, were set to continue into the new year, the group predicted, with consequences for growth.

Supply disruptions would cost industry “more than 50 billion euros ($57 billion) in both 2021 and 2022”, BDI head Siegfried Russwurm said in a press conference.

“Despite full order books, a lack of microchips, components and raw materials will continue to affect production for a long time,” Russwurm said.

Germany’s traditionally strong manufacturing sector has suffered particularly badly at the hands of supply shortages caused by the pandemic.

The country’s carmakers have been forced to interrupt production as they contend with a shortage of chips, an important component in both conventional and electric vehicles.

The continued ups and downs of the coronavirus pandemic added to the economy’s woes with German GDP still struggling to reach its pre crisis level of February 2020.

“The hoped-for post-corona boom is not on the cards,” Russwurm said, while the spread of the more transmissible Omicron variant of the virus posed a new threat were it to lead to significant new restrictions around the world.

“A definitive recovery will be delayed until the summer and that is a rather optimistic scenario,” the lobby boss said, describing the potential for another “stop-go” year of growth.

While the economy was faced with a gamut of different challenges, including rising prices for energy, geopolitical tensions and a shortage of skilled workers, the lobby nonetheless predicted growth of 3.5 percent in 2022.

Member comments

  1. If you fully open the economy up to everyone. And stop the restrictions. I bet the boom starts then.
    Can’t expect a boom in one hand while banning tourism in the other.

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Germany slashes growth forecasts amid Ukraine war

Germany on Wednesday slashed its economic growth forecast for 2022 as consumer prices continued to rise steeply amid the war in Ukraine.

Germany slashes growth forecasts amid Ukraine war

The gross domestic product of Europe’s biggest economy is now expected to expand by 2.2 percent rather than 3.6 percent projected in January, the economy ministry said.

Inflation was meanwhile expected to jump to 6.1 percent for the year, “a rate seen only at times of the oil crisis or shortly after German reunification” in 1990.

Germany is “paying a price” for its backing of Ukraine against Russia’s unprovoked aggression, said Economy Minister Robert Habeck.

“We must also be ready to pay this price,” said the minister, noting that Germany was “paying through higher energy prices, through higher inflation and a slower growth”.

“This literally means that Germany will be poorer compared to the forecasts from three or four months ago.”

Berlin had previously pinned its hopes on a firm recovery for 2022 as the impact of the coronavirus pandemic begins easing.

But Russia’s aggression in Ukraine has laid waste to those plans. Instead, it has further exacerbated supply chain woes and pushed up prices of daily necessities.

Energy prices in particular have leapt since war broke out, forcing the first German companies to take drastic action like idling their plants while consumers are faced with hefty power bills.

READ ALSO: Russian gas stop promises ‘sharp recession’ for Germany

Energy threat

Germany, which is highly dependant on energy from Russia, was also facing a real threat of its gas supplies being cut off.

Russia’s Gazprom turned off its gas taps to Poland and Bulgaria earlier Wednesday over their refusal to meet Russian President Vladimir Putin’s demand for payment in rubles.

An immediate end to Russian gas imports would send Germany into a “sharp recession” next year, the country’s leading economic institutes said in a forecast published in mid-April.

“This has to be taken seriously,” Habeck said on Wednesday, stressing that Germany would continue to make its payments in euros or dollars in line with its European partners.

Converting payments into rubles is the responsibility of Gazprom, he said, acknowledging that there was some uncertainty around how Russia “will
interpret and apply” its recent decree on gas payments.

Habeck also said Germany had managed to start weaning itself off Russian coal and oil faster than expected in response to the war.

The share of crude oil imported from Russia has fallen from 35 percent before the conflict to around 12 percent, meaning a European embargo on Russian oil would be “manageable”, he said.

“This does not mean that an embargo would not significantly increase prices and that there would not be localised supply disruptions… but it would no longer lead to a national economic disaster,” Habeck said.

Berlin has also managed to reduce its gas imports from Russia to 35 percent, compared with 55 percent before the conflict, he said.

However, he said it was “not realistic” for Germany to completely ban Russian gas before next year, given the new infrastructure needed to diversify gas imports.