The German Locomotive Ran Out of Steam in 2019

The German economy, once synonymous with robust growth, had a miserable 2019. GDP increased by just 0.6% and trade friction between the EU and the U.S. could weigh on Germany’s economy in 2020.
Kenny Fisher

Germany has long been accustomed to being the economic powerhouse in the eurozone, as the bloc’s largest economy is a bellwether as to the economic health of the rest of the eurozone. The year 2019 will be one to forget for Germany, as the country’s growth rate fell to just 0.6%, its lowest gain since 2013. The economy has been steadily slowing – GDP was a healthy 2.5% in 2017, but fell to 1.5% in 2018, as the downturn continued in 2019.

Despite the disappointing growth rate in 2019, the country produced a record surplus of EUR 13.5 billion. This was a result of larger-than-expected tax revenue, as well as a low-interest rate environment, which meant lower expenses to service the country’s debt. The government has been reluctant to increase spending on infrastructure or cut taxes, instead allocating large sums towards asylum resettlement. This has drawn criticism, as immigration has become a sensitive issue.

The German economy has not only slowed down, but has also become less competitive in global rankings. According to a recent report by the World Economic Forum, Germany dropped four places lower, to seventh in the world. Global trade wars bear much of the blame for the weaker German economy. The U.S.-China trade war has dampened global growth, which has reduced the demand for German-made goods. In October, the Trump administration slapped tariffs on some $7.5 billion worth of European Union goods. Trump has also threatened to impose tariffs on European cars and automotive parts, which could have a disastrous effect on the German auto industry.

The New Year has started on a positive note, with the U.S. and China signing the Phase One trade accord. If the German economy is to rebound in 2020, the EU will have to follow suit and improve its trade relationship with the United States.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.