Germany’s Economic Outlook 2019

Since the financial crisis in 2008, Germany has been the leading economy in the European Union. Due to turmoil in the global economy and some negative internal forces, the historically strong and stable German economy is expected to experience low growth in 2019.

Tariffs between China and the United States are having a negative impact on the German auto and steel industry. Because China is one of the primary importers for Germany’s car companies, its economic contraction is having an adverse impact on Germany’s exports. Volkswagen, whose primary market for its’ cars is China, said sales decreased 3.4% partly because of decreased demand there. An indirect impact of The United States’ tariffs on steel imports has been an oversupply in Germany from Russian and Turkish steel. That has driven prices down and one German company, Salzgitter, projected that its pretax profits in 2019 will be less than half of its 2018 pretax profits. International events had detrimental impacts, but domestic policies also impacted Germany’s economy.

Internally, Germany has a labor shortage that prevents them from operating at maximum efficiency. It is estimated that Germany is losing out on $33.7 Billion every year by not having enough skilled workers to meet demand. Currently, according to the financial times, Germany has more than 1.2 million job vacancies and the unemployment rate is as low as one percent in some cities. This shortage is caused by Germany’s low birth rate in conjunction with baby boomer workers deciding to retire. Government policy on immigration hasn’t historically been accommodative to immigrants except in specific industries.

On the topic of immigration law, Alexander Burstedde, a labor economist at the German Economic Institute (IW), said, “This used to be an issue limited to highly qualified professions such as computer science and engineering. Now, this is a much broader problem, affecting many non-academic professions.” The German government is now taking steps to ease immigration rules to meet this need.

Citing these issues and more, Peter Altmaier, the Economy minister in Germany, projects that the German economy will have a  1% growth rate in 2019, its slowest growth since 2013.