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The German economy could have grown 50 percent more between 2021 and 2024 if the export industry had not been stopped by problems, including labor shortages and bureaucracy, according to a Bundesbank research that emphasizes the scale of the recent decline of the country.
The simulation of the central bank suggests that the German GDP would be extensively extended by 2.4 percentage points during the period that exports led with the demand in important markets.
Although the largest economy of the eurozone grew by 4.6 percent in those years, the output shrank in the last two, as a result of a malaise in important export industries, including machines, electronics and chemicals.
“The loss of market share in German exports has contributed considerably to the economic weakness of the country in recent years,” said the study.
The economic decline of Germany was particularly acute in 2022, when the energy fund crisis, the worldwide bottlenecks of the supply chain and the reduced demand of China, 1.3 percentage points of growth.
But structural issues in the German economy have played an even greater role, in which the Bundesbank points to labor shortages, slow productivity and increasing regulatory burdens.
German companies complain about a much greater increase in bureaucratic obstacles compared to their peers in the euro zone, such as slow approval procedures and difficult documentation requirements. On the supply of the supply side, only “more than three -quarters” of the loss of the global market share between 2021 and 2023 in important sectors such as machines, electronics and chemicals.
The demand-side factors, on the other hand-, such as declining appetite for German cars, weak Chinese growth or sanctions on Russia playing, a smaller role, which since 2017 only contributed a third of the losses to the market share. German manufacturers provided the tools and vehicles that were based on China’s industrial expansion. But the relationship has become increasingly competitive because China has built up its domestic industry in areas where German companies used to dominated.
According to the Bundesbank, German companies are now losing market share to Chinese rivals in various export markets. Between 2021 and 2023, the export losses of Germany almost corresponded to those of the UK after Brexit. Meanwhile, American companies gained ground, stimulated by the demand for high-tech products and energy exports.
To reverse the economic slide of Germany, the Bundesbank calls for a package of structural reforms, including better incentives to encourage Germans more, simpler migration procedures, reduced bureaucracy and targeted support for start-ups and innovation.
Bundesbank -President Joachim Nagel warned in a recent speech that the German Chancellor Friedrich Merz will not be sufficient to resume the economy of € 1 in infrastructure and defense.
“More fiscal leeway alone will not solve the growth crap of Germany,” he said. “The causes are going deeper.”
