After recording zero growth in the fourth quarter of 2018, narrowly avoiding back-to-back quarters of economic contraction, one of Germany’s most prestigious research institutes Thursday cut its expectations for German growth this year by almost half.
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The Munich-based Ifo Institute also said the pace of employment growth is decelerating. That followed data showing the country’s all important manufacturing sector had significantly slowed, badly undershooting economists’ expectations.
- That’s a major problem for Germany because exports make up about half of its GDP.
“Germany’s economy is really exposed to any shifts in the international market,” George Friedman, founder and chairman of Geopolitical Futures, tells Axios. “You have a problem with the largest economy in Europe not really being in control of its own economy. So in that sense it’s the most dangerous country in Europe because it’s the most important country and incredibly vulnerable.”
The big picture: As the driving economic and political force in the euro zone, and the world’s third largest growth engine, Germany is expected to help pull its neighbors out of an economic malaise, but right now it’s reflecting the broader weakness.
The 28-member bloc is facing widespread growth declines (Italy is in recession, Sweden just avoided one) and political instability from Brexit and growing anti-euro populism.
- “At this point the German economy is more the victim of problems in the global economy than the cause,” says Jeromin Zettelmeyer, a senior fellow at the Peterson Institute for International Economics.