German economy may stumble due to supply chain crisis, fuel rates and Corona  

German economy

Berlin – Germany, Europe’s largest and chief economy, has begun receiving successive jolts. Leading German economists forecast that the German economy, which slowed down last year due to the Corona pandemic, may reach a growth rate of only 2.7% this year. At the same time, the Federal Audit Office reports that the funds available to the German government are in a critical state. As Germany ranks fourth in the world’s economy, the jolts it may suffer would impact the global economy, claimed analysts.  

German economy

Last year, the German economy had fallen as much as 4.9% after the outbreak of the Coronavirus pandemic. However, from the beginning of this year, the cycle of the global economy had slowly begun to streamline. Moreover, as per the indications, the German economy appeared to be benefiting as well. Experts, as well as analysts, had predicted that the economy would recover. But in the last few months, the economy has once again begun experiencing jolts.  

Germany is known as a manufacturing and export-oriented economy. The production and export of vehicles, machinery, chemicals, electronic products, and medicines are considered the backbone of the German economy. In 2019, exports accounted for 40% of Germany’s GDP. Germany’s manufacturing and export-oriented economic cycle have begun bearing huge shocks by the lockdown and other sanctions imposed in the wake of the Coronavirus outbreak.  

It has surfaced that Germany’s industrial sector index has been declining for four consecutive months. The global supply chain crisis has contributed as a major factor to the decline. The crisis is hampering the German companies from getting the raw materials they need for production. Simultaneously, it is hampering the process of delivering the finished product in time. 

Furthermore, the rising fuel prices have made electricity more expensive. Besides, some areas are suffering a power shortage crisis too. Therefore, many large German companies have begun shutting down their units. German entrepreneurs have been grudging that they cannot fulfil orders on account of a shortage of raw material supply and electricity. It has emerged that while the double crisis is affecting production, the outbreak of Corona in Germany has intensified in the last few weeks. It is also feared that it may affect domestic demand.  

Some economists and the media speculate that Germany could hit the ‘Bottleneck Recession’. Other information surfacing in terms of the German economy also seems to endorse this. A new report released by Germany’s Federal Audit Office mentions that the state of funding available to the government is critical. The Federal Audit Office has advised that the next government must take immediate action to make the federal finances sustainable again.  

If the situation continues, Germany may be noted as a retrograding European economy this year, Economist Holger Schmidt has claimed. Oliver Rakau of Oxford Economics said that the Corona pandemic is a key factor in the slowing down of the German economy. Katharina Utermöhl, an expert from Allianz, while drawing attention towards Germany’s inflation reaching its highest in three decades, made aware that this factor also could prove decisive to the economy. 

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