German growth slows sharply in 2019

17 January, 2020 12:00 AM printer

BERLIN: The German economy grew by 0.6 per cent in 2019, the weakest expansion rate since 2013 and a marked cooling from the previous year, as export-dependent manufacturers in Europe’s largest economy face increased headwinds from trade disputes and less foreign demand.

The preliminary estimate, released on Wednesday by the Federal Statistics Office, was in line with a Reuters poll of analysts and followed growth in gross domestic product (GDP) of 1.5 per cent in 2018, report agencies.

“This means that the German economy grew the tenth year in a row. This is the longest growth period since German reunification,” statistics official Albert Braakmann said.

Stronger private consumption, higher state spending and booming construction helped support growth in 2019 as struggling manufacturers dragged on activity.

Deka Bank analyst Andreas Scheuerle said the German economy had ended an unusually weak year marked by “bad luck and misery”, pointing to tariff disputes and Brexit uncertainty.

“Without the domestic demand - this means private consumption, state spending and construction - the German economy would have entered a recession,” Mr Scheuerle added.

The office said the budget surplus of the public sector, including federal states, municipalities and social security systems, fell to 49.8 billion euros (S$74.7 billion) or 1.5 per cent of GDP after 62.4 billion euros or 1.9 per cent in the previous year.

Chancellor Angela Merkel’s ruling coalition is at odds over how to spend the federal government’s budget surplus of 13.5 billion euros. Her conservatives are calling for corporate tax cuts while centre-left Finance Minister Olaf Scholz favours more public investment.

Exports edged up by 0.9 per cent last year after a 2.1 per cent increase in 2018 while imports rose by 1.9 per cent following a 3.6 per cent jump, the office added.

This meant net trade subtracted 0.4 percentage points from German growth whereas domestic activity contributed 1.0 percentage point, leaving an overall growth rate of 0.6 per cent.