The Organisation for Economic Co-operation and Development (OECD) has forecast the German economy will grow by less than one percent by 2021 – lower than official Government predictions. In its autumn review, the Paris-based think-tank has highlighted a “weakness” in Germany’s manufacturing industry and warned it will “rub off on the rest of the economy”. According to the OECD’s forecast, the German economy will only grow by just 0.4 percent in 2020 and only 0.9 percent in 2021.
These figures are much lower than the forecasts by the Bundestag which is expecting an upturn and GDP to reach one percent next year.
Germany’s struggling car industry has seen overall manufacturing exports fall by 1.5 percent in the first six months of 2019.
The OECD state in its report: “The stagnation of world trade has dealt a heavy blow to the export-dependent economy, as export orders and industrial production have declined.”
The report added: “Private consumption and the construction industry are expected to remain robust, but weakness in manufacturing will rub off on the rest of the economy, but because of the shortage of skilled workers and more flexible working hours, the job market is not expected to deteriorate significantly.”
The OECD also warn Germany has little control over its own economy with external factors such as China’s ongoing trade war with the US and Britain’s exit from the European Union, remaining significant factors affecting the EU largest economy.
The report said: “Germany’s export-dependent economy is particularly vulnerable to external economic risks and a further slowdown in world trade.
“An intensification of trade disputes, a stronger economic downturn in China or continuing Brexit uncertainty, would worsen prospects and increase the risk of significant spillover effects on the domestic economy and the labour market.”
The OECD has urged the German Government to invest in roads, schools and digital infrastructure to avert the slump.
The economic think-tank added there is a significant investment backlog and advise further funding for the development of fast Internet, housing, energy, waste and water.
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An economic recession is triggered when GDP falls during two consecutive quarters, or six months.
Olaf Scholz, German finance minister said: “Looking at the German economy, which is really resilient and globally active, you have to understand there’s slower growth in the world.
“This has an impact on the economy in Germany. That’s obvious.”
(Additional reporting by Monika Pallenberg)