Germany GDP could shrink in 2012 if global trade stalls – experts

09 November 2011 17:53  [Source: ICIS news]

LONDON (ICIS)--Germany’s GDP could shrink by 0.5% next year if impacts from the eurozone debt and banking crisis cause stagnation in global trade, the country’s advisory council of economic experts said on Wednesday.

The uncertainty surrounding the resolution of the eurozone sovereign debt crisis may have a major impact on world trade, the council said in a report to the government. 

“In case of a stagnation of global trade, Germany would go into recession,” said the council of five economists, known as the Sachverstandigenrat fur Wirtschaft.

“There is a real danger that the already fraught funding conditions for sovereigns may tighten further”, with Germany’s economy facing increasing risks from “a vicious circle of an interlocking sovereign debt crisis and a banking crisis”, it added.

However, overall the council said it sees such “a worst-case scenario” as less likely than alternative scenarios.

“Even after considering all external risks, one needs to bear in mind that Germany’s economy is in a relatively good position, when compared with other countries”, in particular with regard to employment and government deficits, the council said.

For its part, the council forecast 0.9% GDP growth for Europe’s largest economy next year – “markedly weaker” than the 3.0% year-on-year growth expected for 2011.

While the upturn in Germany’s economy will be clearly slowing next year, the slower growth reflects a return to “normality” following the rapid boom and recovery from the 2009 crisis year, the council said.

The council also said that despite the heated debate about risks German taxpayers may face from the eurozone debt crisis, Germany’s export-oriented economy remains the “principal beneficiary of monetary union up to now”.

The numerous appreciations of the D-Mark in the past caused severe economic problems for exporters and destroyed many jobs, the council said.

It also pointed to the situation in Switzerland, where that country’s central bank recently decided to peg the Swiss franc to the euro in order to counteract the impact of the strong franc on the economy.

Read Paul Hodges’ Chemicals and the Economy Blog

By: Stefan Baumgarten
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