For the third consecutive month, Germany’s economic outlook has failed to impress investors. The country, which boasts Europe’s largest economy, has been struggling for awhile now and there’s little hope due to global trade tensions continuing, according to Bloomberg.
In fact, “Germany has been mired in a manufacturing slump for more than a year, and most recent numbers don’t hint at a turnaround,” according to the news service. Meanwhile, “the Bundesbank predicts the economy shrank in the second quarter, and another investor survey suggests the economy may slip into a recession."
This slip into a recession, notably, comes as the country’s largest trading partner, China, has been struggling economically in recent months as well. “The continued negative trend in incoming orders in the German industry is likely to have reinforced the financial market experts’ pessimistic sentiment,” according to ZEW President Achim Wambach in an interview with the news organization. “An end to the issues hitting exporters is ‘currently not in sight.’”
The International Monetary Fund, meanwhile, mirrors similar sentiments in a recent article. For instance, the article points to numerous different reasons behind the country’s economic issues and provides an analysis on what needs to change. The first? Growth problems. “After several years of real GDP growth averaging over 2 percent annually, Germany’s economy slowed sharply in the second half of 2018,” according to the IMF.
Additionally, the IMF says that there needs to be structural changes to the way the country operates. “With the working-age population set to decline and widespread labor shortages, reforms to raise productivity and domestic investment are key to sustaining growth going forward,” according to the organization.
Beyond these structural changes, the IMF also states that Germany’s financial sector needs to make some improvements to help get the country out of its economic slump. “Amid the ‘low-for-long’ interest rate environment, the German banking system needs to accelerate measures to shore up profitability,” according to the organization, “which has been persistently under pressure from high costs and slow progress with restructuring.”
According to CNBC, meanwhile, issues in Germany that point to an upcoming recession have the chance to greatly affect numerous European nations. “The German economy has lost steam and that could shake other euro zone countries too, including Italy, France, Poland and Spain,” according to the article.
“The more an industry-led German recession would spread to the domestic side of the economy, France, Spain and tourism spots in the south (of Europe) would suffer too,” said Florian Hense, a euro zone economist, in an interview with the news service.