Financial News: This Economist Is Worried About More Companies Shifting

This Economist Is Worried About More Companies Shifting Production From Germany. Why?

(RTTNews) - German manufacturing is facing a deep structural crisis that is largely to blame for the persistent sluggishness in the economy and now a Commerzbank economist is concerned that if the uncertainty regarding the government's economic policies does not clear fast, companies may be forced to relocate their business to other countries. The <a href=https://www.rttnews.com/3497512/german-private-sector-activity-continues-to-shrink.aspx target=_blank >S&P Global purchasing managers' survey</a> and the <a href=https://www.rttnews.com/3497821/german-ifo-business-confidence-worsens-in-december.aspx target=_blank >ifo business confidence survey</a> confirmed the slump in the German manufacturing sector, which was once the poster child for the country's strong economic growth.

That said, economists brush off concerns that the German economy is in disaster mode, but they agree the biggest euro economy is stuck in the stagnant territory. Many affirmed that Germany is still the main economy in the single currency bloc and in Europe. Commerzbank Chief Economist Jorg Kramer said a clear majority of the companies surveyed by the Ifo Institute are pessimistic about their current and future business situation.

"Manufacturing is in a deep structural crisis - particularly carmakers, their suppliers and energy-intensive sectors such as chemicals," the economist observed.

"They are suffering not only from <a href=https://www.rttnews.com/3497186/german-exports-fall-most-in-10-months.aspx target=_blank >weak demand from China</a> and comparatively high energy costs, but also from the erosion of Germany's competitiveness, which began during the Merkel years and continued under the outgoing coalition."

"If the general election on 23 February does not lead to a U-turn in economic policy (for which there is as yet no majority), even more companies are likely to relocate production to Eastern Europe or the US," Kramer added.

The slump in manufacturing is likely to prevent the <a href=https://www.rttnews.com/3496963/ecb-cuts-deposit-rate-to-3-00.aspx target=_blank >European Central Bank's falling interest rates</a> from having any significant impact on GDP from spring onwards, the economist said.

Commerzbank expects only GDP growth of 0.2 percent in 2025.

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