The Federation of German Industries (BDI) has more than halved its economic forecast for 2022 due to the twin crisis from the Ukraine war and the fallout from the coronavirus pandemic. The FDI forecast that gross domestic product would grow by just 1.5 percent. He had expected about 3.5 percent before the outbreak of the Russian war against Ukraine.
“A recovery in the sense of a return to pre-crisis levels can only be expected towards the end of the year at the earliest – not to mention we still miss three years of trend growth,” he says. BDI President Siegfried Russwurm on the occasion of German Industry Day in Berlin.
However, the economy could get even worse if not enough Russian gas reaches Western Europe. “We are concerned about the reduction in Russian gas exports,” Russwurm said. “A disruption would have catastrophic consequences for the manufacturing industry and would inevitably send our economy into recession.”
Actually, the companies could draw plenty
“The order book remains at an industry record high and capacity utilization is high,” said Russwurm. “However, in some cases, the existing supply bottlenecks significantly reduce production.” The questionable zero-Covid strategy of Germany’s main trading partner China is crippling global trade. The effects of the now lifted corona lockdowns in China in the form of production backlogs and disrupted supply chains should still be felt in the summer months.
Investments are also firmly on hold
“Uncertain economic prospects and increased uncertainty from the war are slowing investment activity in many places,” Russwurm said. The cost burdens suffocated the companies more and more. Among other things, a globally competitive electricity price is needed. The abolition of the so-called EEG-surcharge is therefore not sufficient. Electricity tax and grid fees should also be significantly reduced.
The chairman of the BDI argued for an acceleration and adjustment of the energy transition. “Security of supply has the highest priority, so now priority is given to filling the gas storage tanks rather than generating electricity from gas,” Russwurm said. “So now we need more electricity from coal so we have full gas storage in the winter.” The expansion of wind and solar systems and the connecting high-voltage lines must be realized much faster than before. Securing new sources of supply and building an infrastructure for liquefied gas were also high on the agenda.
Industry wants to reduce dependence on China
German industry also wants to reduce its dependence on business in China. “Asia is much bigger than China. The need of the hour is to open other markets as well.” The People’s Republic is important to the German economy. “And yet there are a few things we don’t like.” Russwurm cited the lack of openness in some market segments and the social system as examples.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
