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Economic improvement

Sabine Kinkartz / gbAugust 16, 2012

The latest global economy report from the German Chambers of Commerce has created some buzz for its somewhat surprising good news of a budding economic recovery.

Cars loaded on a barge Foto: Oliver Berg dpa +++(c) dpa - Bildfunk+++
Image: picture alliance/dpa

Germany's total export volume only grew by 4 percent this year, or roughly half the rate of 2011, but the latest economic forecast of the German Chambers of Industry and Commerce (DIHK), presented Thursday in Berlin, suggested exports will grow 6 percent or more in 2013.

"The global economy is recovering," said Volker Treier, the chief export specialist at the DIHK. For next year, Treier said the German export economy will surge ahead, after a dip in 2012, which Treier blames on the eurozone debt crisis."Many countries were forced to cut budgets, raise taxes and implement structural reforms, which at least temporarily pinched growth," he said.

Volker Treier
The economic outlook for Germany is improving, says Volker Treier from the DIHKImage: DIHK

The situation was worsened by the financing difficulties many companies and their business partners faced, including German firms, as well as a worldwide trend toward protectionism, noted Treier, "Altogether this meant slower growth this year of just 3.3 percent."

The world is looking to Europe

If the economic climate in Europe improves, the rest of the world can breathe easier. But in the coming year, will the European economy get better, especially in the eurozone crisis countries?

For 2012, the eurozone economies shrunk 0.2 percent. For 2013, the DIHK has forecast growth of 0.7 percent. Treier said he sees Spain, Portugal and Italy taking "small steps out of the crisis" following measures to improve their competitiveness.

"What we need is patience," he said. "But it also means that we don't need daily and public doses of meltdown scenarios coming from politicians."

Media ranting only contributes to the uncertainty, said Treier, and paralyzes business and industry. German companies have already pulled out of Greece in large numbers, and other European crisis countries could follow because of the financing problems, he stressed.

Containers at Hamburg Harbor Photo: Fabian Bimmer/AP/dapd
Hamburg's burgeoning port is the gateway for German exportsImage: dapd

Companies without a sufficient cushion of their own capital have little chance of doing business, according to the DIHK's Ilja Nothnagel.

"German firms are helping themselves by demanding payment up front, with shorter payment periods and are even forgoing deals if the customer is not in position to order them," Nothnagel said.

He also pointed out that export credit insurance was helping to bridge some of these problems, but noted that "providers of private export credit insurance were looking a lot closer [at the deals] and that's a problematic mixture."

Business is booming in emerging economies

Outside Europe, China and the United States continue to be the most important markets for German exports. But, at the same time, trade with emerging markets in threshold countries has been gaining ground.

Men standing in front of a turbine Photo: Jens-Ulrich Koch/dapd.
Machinery is a major German export factorImage: dapd

In 2000, Germany sold 4.5 percent of its total exports in the so-called BRICS countries  of Brazil, Russia, India, China and South Africa. In 2013 that figure is expected to climb to 15 percent. One of the most successful products is German machinery, but major growth is also forecast for energy, environmental and medical technologies.

Since Germany continues to sell more goods abroad than it imports it will maintain a large trade surplus. But Treier from the DIHK said he does not view that as a drawback.

"The surplus does not just mean that German goods are desirable. The surplus is, in essence, a capital export, and thus, we are expanding our position as an important lender for countries with large deficits, like the USA, Turkey and Brazil," he noted, adding that "these countries have young populations that are still growing and therefore also have a higher demand for capital."

A trade surplus, however, is only a win-win situation for both sides when the surplus is invested and not consumed, Treier said.