Recession In Germany And Its Impact On The Global Trade

RECESSION IN THE WORLD’S LARGEST ECONOMY - CAUSES

Germany is among the top 5 countries that are considered the biggest economies in the world. Moreover, being a European nation, the economy of Germany is the largest in the entire European continent.

Unfortunately, this economy of the world is now moving towards recession as the GDP of Germany has declined for two consecutive quarters, i.e., a 0.5% decline in the last quarter of 2022, followed by a decline of 0.3% in the first quarter of 2023. As per the guidelines, if a country experiences a decline in its GDP for two or more consecutive quarters, then that nation has entered the phase of recession.

The main key reasons behind this massive economic recession are inflation, a rise in interest rates, and decreased consumer spending. Another major event that worsened the German economy was when the prices of energy rose due to the Russian-Ukraine conflict. This decreased the local households’ demands and spending.

The inflation rate touched 7.2% in the month of April 2023. As inflation reached a record level, domestic consumption and spending declined as the citizens were not able to even afford daily-use items.

With the rise in inflation and cost of living, the labor force of Germany, along with other European countries like the UK, France, and Greece are doing strikes which are affecting the flow of goods at the ports and causing hindrances in international trade too. It is expected that due to this recession, the Global Trade Data values for the year 2023 would contract significantly.

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AFFECT OF RECESSION IN GERMANY ON THE WORLD

As the fourth largest economy of the world is facing recession, there would surely be a negative impact on Global Trade.

Firstly, the Germany Trade Data would be showing a decline as the demand of the nation has declined, and on the other hand, frequent labor strikes are causing a slowdown in exports. As this happens, Europe Trade will also not reach its optimum level during the peak season as per Europe Trade Data insights.

To understand better which nations would be badly hurt due to the recession, we are going to list some of its major trade partners of Germany along with their yearly trade figures.

From the table, it is clearly seen that Germany Import Data is majorly fueled by the imports received by China, the Netherlands, and the USA. Whereas Germany fuels the economy of the USA, France, and the Netherlands the most.

That means China Trade Data, along with the US Trade Data and the Netherlands Trade Data would show decline in trading significantly in the coming months.

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WOULD INDIA BE GETTING IMPACTED BY THE RECESSION IN GERMANY?

It is too early to reach the conclusion whether India’s economy would be getting impacted by this recession or not, but according to some claims and analyses, India will also see a minute downfall in its exports to Germany. As India is a chief exporter of organic chemicals, machinery, and clothing products to Germany, the demand for these goods would decline in Germany.

Chairman of the CII committee, Sanjay Budhia stated that in the year 2022, Germany had a share of 4.4% in total Indian Exports which majorly included chemicals, garments, iron and steel items, leather products, and footwear. He added that if any impact is observed in India due to the recession, these industries would be majorly affected and a downfall of approximately USD 2 billion can be observed.

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WOULD VIETNAM, TURKEY, AND THE PHILIPPINES OBSERVE ANY IMPACT ON THEIR TRADE PATTERNS?

Let’s check that would there be any negative impact of this recession on countries like Vietnam, Turkey, and the Philippines which are considered as the emerging countries of the world.

As seen from the Philippines Trade Data statistics, the Philippines would be the least affected among all, followed by Vietnam, and then Turkey. In the case of Vietnam, the Exportation would decline with respect to Germany considerably for some time now as per the latest Vietnam Export Data trends.

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CONCLUSION

With the start of this global recession, the government of Germany is optimistic that the nation would soon recover from the losses and that this recession would come to an end. This is so because the people of Germany are shifting to other cheap alternatives of fuel like Liquified gas which is the major cause of inflation in the country. Secondly, as China has again started its operations, Germany is trying to boost its exports to generate more and more revenue.

However, the apex body namely the IMF, has stated that Germany would be the most stagnant and weakest economy of the year 2023 and its economy would contract by 0.1%.

Let’s see what happens next and how the effect of this recession is going to impact the economies of other countries. For more such cool international information and reports, subscribe to our newsletter so that you don’t miss out on any updates.

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