Yahoo Finance Germany slashes growth expectations in new GDP forecast
The German government has slashed economic growth expectations for the country due to increasing global protectionism and trade wars.
The German economy is now expected to grow by 1.8% annually in both 2018 and 2019, down from 2.2% in 2017. The updated forecast published on Thursday is a far cry from earlier expectations for faster 2.3% growth in 2018.
“Blame trade, oil prices, Italy, Brexit, emerging market crisis, you name it,” Florian Hense, an economist at Berenberg bank, told Yahoo Finance UK. “This cocktail of risks has weighed on the German economy so far this year, and will continue to do so.”
Germany’s economy minister Peter Altmaier said the growth outlook was weighed down by external factors, including protectionist tendencies and international trade disputes. He said he hoped the US and European Union would follow through on their summer plans to ease trade tensions and lower tariffs.
US President Donald Trump had previously threatened a 25% tariff on cars and auto parts from the European Union, which presents a massive threat to German manufacturers. This followed the US imposition of new tariffs on European steel and aluminium.
Barclays analysts estimated this week that the introduction of a 25% US car tariff would reduce German GDP by 0.2%.
“Germany [is] the most vulnerable country to car tariffs in Europe,” the analysts said.
Germany is considered the economic powerhouse of Europe and it is fuelled by the auto sector, which produces 5.5 million passenger cars each year. The industry made €423bn (£371bn, $489bn) last year and employs about 820,000 workers.
The German government noted that the recent introduction of new testing and emission rules for passenger cars in Europe also held back economic growth, as the auto sector struggled to get their cars through the testing process. The government noted this had temporarily dented German production and exports.
With files from Reuters
