The German economy has hit a difficult turning point! Critical forecasts from experts

Recent data from the German economy, the world's fourth largest with a GDP of 4.1 trillion dollars, is raising concerns.

The German economy, which shrank by 0.4 percent in the last quarter of last year and 0.1 percent in the first quarter of this year, stagnated in the second quarter of the year.

The German Central Bank (Bundesbank) expects a contraction in the third quarter as well.

According to the latest OECD forecasts published this week, the German economy is projected to shrink by 0.2 percent in 2023. According to the OECD, Germany is one of two G20 countries expected to shrink in 2023. The other is Argentina.

Annual consumer inflation in Germany is also hovering at 6.1 percent, well above the 2 percent target.

TÜSİAD Berlin representative Alper Üçok and journalist Tunç Akkoç evaluated the latest developments in the economy of Germany—which is Turkey's top export destination, home to 3.5 million Turks, and one of the top countries preferred by Turks wishing to move abroad—for Emre Deveci from Sözcü.

‘PROBLEMS IN THE ECONOMY ARE STRUCTURAL’

Stating that the German economy has not been able to shake off the stagnation it entered with the Covid-19 pandemic for 4 years, Üçok said, “For this reason, the problems in the German economy are not temporary, but structural.”

Noting that a comprehensive structural reform program was implemented in Germany by the Schröder government in the early 2000s, and that the German economy was able to grow during the Merkel era with the Agenda 2010 structural reform program, Üçok commented, “However, changing global conditions and competition create a need for a new set of structural reforms, and the end of the Merkel era and the current governments have not been able to make progress on this issue.”

‘ENERGY SHOCK HAD AN IMPACT, IT IS LOSING COMPETITIVENESS’

Üçok lists the structural problems of the German economy as follows:

- Germany is late in realizing the transformation in some sectors that are the foundation of its economy and industry (automotive, chemicals, machinery, electronics) and is therefore losing its competitive power.

- Industrial production in Germany is declining. In many sectors, production is at the level it was 10 years ago.

- The “German Business Model” was also damaged during the process that began with Russia's invasion of Ukraine. German industry, which supplied a large portion of its energy and raw materials from Russia, was significantly affected by the energy shock. In energy-intensive sectors (iron-steel, metallurgy, chemicals, glass, paper), the production decline in 2022 was between -10 percent and -20 percent. A process of contraction and deindustrialization is possible in some energy-intensive sectors.

- Germany is among the most backward countries in the EU in terms of digital infrastructure, and this is negatively affecting the economy.

- The British magazine The Economist carried the question “Is Germany once again the sick man of Europe?” on its cover in its mid-August issue.

‘THERE IS A DEMOGRAPHIC GAP, INVESTMENTS ARE MOVING’

• There is a demographic gap. Germany needs 400 thousand skilled labor migrants every year to maintain its economic level. Because this cannot be achieved, there is a shortage of 1.2 million positions, 400 thousand of which are for skilled labor such as engineers and technicians.
• For these reasons, the German business world is moving or considering moving its new investments or a portion of its existing investments outside of Germany. According to a survey by the Association of German Chambers of Industry and Commerce (DIHK), 1 in every 3 businesses is moving its investment abroad. In addition to this, Germany is also struggling to attract foreign investment. For example, it has fallen far behind France in attracting foreign investment in the last 2 years.
  
  

CHINESE COMPETITION

- In addition to all these, bureaucracy has also become a huge problem in Germany.

- The most important project of the current German government is green