- In May, Germany recorded its largest foreign trade deficit since 1991, amounting to EUR 0.9 billion.
- According to PKO BP economists, the competitiveness of the German economy based on cheap natural gas from Russia is under a big question mark.
- A reduction in the supply of energy sources from Russia means that the German economy could fall into recession
- German analytical centers estimate economic losses from the lack of gas supplies from Russia at 6-12 percent. A threat to GDP and 5-6 million jobs in our western neighbours
- The problems of the German economy will affect the entire economy of the Eurozone, but also ours, as it is Poland’s most important trading partner.
- Almost 28 percent goes to Germany. Exports from Poland were worth EUR 29.5 billion in January-April this year alone.
- More such information can be found on the main page of Onet.pl
Recent reports on Germany’s trade have drawn the world’s attention to the economies of our western neighbours. In May, Germany posted its first trade deficit since 1991y, which is EUR 0.9 billion. Exports fell 0.5 percent. Month-on-month, and imports increased by 3%.
The importance of these data is best demonstrated by the behavior of the single European currency. On Tuesday, the euro was at its weakest against the US dollar in two decades. Analysts see the source of the weakness of the euroland’s currency precisely in the fear of a global recession, and its source, among others, is the attack on Germany, that is, the reduction of gas supplies from Russia and the increase of its prices on global markets, where the Kremlin must fill the shortage of raw materials after the return of the pipeline.
Russia cut off Germany’s oxygen
The problems of German trade are the result of Western economic sanctions imposed on Russia and the high prices of energy resources, which not only hit our Western neighbors, but may have far-reaching consequences for him.
“The data suggest that the German model of the economy is based on export competitiveness. The use of cheap energy sources from Russia, which was put into practice half a century ago, has been severely tested in the past two months“- Economists of PKO BP Bank Note. In their opinion, the scenario of further development of the situation in the German economy depends, among other things, on the political reaction of Berlin.
“Maintenance current status, That is the current economic model, perhaps it should mean significant concessions to Russia (as seen in some signals from Germany). If such concessions are not granted, the risk of tougher measures by Russia, including further reduction of natural gas supplies, will increase,” experts of the largest Polish bank stress.
German business fears the consequences
For now, gas supplies to Germany via Nord Stream are limited, but the government in Berlin is considering stopping them altogether.
According to PKO BP analysts, in the short term, it is difficult to estimate the extent of economic losses. These appear mainly in autumn or winter, when there is a fear of providing gas supplies to German industry.
In recent weeks, German think tanks have been trying to assess the scale of the problem. Their opinion The amount of economic losses can range from 6 to 12%. GDP, and it threatens the existence of 5-6 million jobs.
They are particularly pessimistic about the development of the German company situation. Last week, the Bavarian Business Association (vbw) submitted a report showing that a hypothetical suspension of Russian gas supplies to the EU from July 1 would result in a 12.7 percent decline in Germany’s GDP. This is a more pessimistic view than that outlined by other experts, including this one from the Bundesbank.
Families are protected
Politicians in Berlin compare Europe’s gas problems to the crisis that triggered the collapse of Lehman Brothers, one of the biggest US investment banks. At the time, chaos reigned in global markets, with successive economies falling into recession.
German Economy Minister Robert Habeck Accurately compares the current situation in the energy raw materials market with the financial crisis that swept the world in 2008.
The same minister announced on Tuesday In case of gas shortage, the authorities will give priority to private houses. The same probably happens in schools and hospitals. However, business, especially industry and energy, can no longer rely on such options. Here, only a part of the demand is satisfied to protect vulnerable consumers, i.e. ordinary Germans.
The Bavarian Chamber of Commerce argues in its analysis that the glass industry would be particularly affected, where production would almost halve, while the steel, chemical, ceramics, food and textile industries would fall by approximately 30 percent.
German chemical company BASF, one of the largest natural gas consumers behind Oder, has already announced it will cut production.
The inflationary hydra will rear its head
The supply shock that Germany, but also the entire EU, is waiting for, will have a strong impact on prices, as the limitation and possibly the cessation of gas supplies from Russia will also contribute to the recession in many economies. Theoretically, a decline in GDP should lead to reduced consumer demand, and this should translate into lower price dynamics. However, experts see the European energy crisis as a source of stagnation and simultaneous high inflation.
Economists at Morgan Stanley earlier this week expected the eurozone to contract in the final quarter of the year.Mainly because of the risk of restricting the flow of natural gas.
Deutsche Bank analysts believe they will continue Gas shortages “increase risk of impending recession in Germany over energy supply”And it indicates a “clear decline” in the euro against the US dollar. The latter event becomes mere matter.
The government in Berlin realizes that a decline in German GDP is a more and more debated scenario. Minister Habeck acknowledged on Tuesday that he sees “too many” fears of a recession and his “So the country will face massive challenges in the coming months“.
It is still unclear what Berlin’s energy policy will be in the coming months and whether the Olaf Scholz government will eventually return to nuclear power plants. Mere generation in coal or oil power plants will not be enough, especially for survival in winter, not only for sports, but also for maintaining the competitiveness of the economy, especially for exports in the years to come.
The first company asks for help
The extent of the problems facing Chancellor Olaf Scholes’ office is illustrated by the situation at German giant Unibur. It is one of the largest importers of Russian gas across the Oder, which is currently struggling with liquidity problems – according to media reports – Talks with the government about a rescue package worth around 9 billion euros.
Companies like Uniper buy gas under forward contracts to ensure security of supply at reasonable prices. However, the Kremlin’s decisions to cut off or restrict gas supplies to countries that support Ukraine mean many companies must buy gas on the spot market, where prices have hit record highs in recent weeks.
Bloomberg notes Currently buying gas at rapidly rising market prices, Uniper is losing around 30 million euros a day..
That’s why Chancellor Scholes is signaling that the gas importer needs help after the Lufthansa outbreak. The government then gave the airline a loan and took 20 percent. Shares.
For us, Russia has already turned off the gas pipeline, but the problems of our western neighbors may make this problem worse. We currently import some gas from Germany, but any further restrictions on supply from Gazprom will affect us as well, as the German partners will have to focus on their own market.
The solution for the Polish economy is to operate the Baltic Pipeline gas pipeline in the fall. Our system operator, Gas System, ensures that the project starts without delay. Representatives of the government and PGNiG have announced that the contract for raw materials from the Norwegian shelf will be sufficient for our needs.
Even if we manage to cover the shortfall resulting from the reduction of gas imports from Russia in autumn and winter, the problems of the German economy will not be without an impact on the growth rate of our GDP.
Today Analysts predict tech recession in Poland, i.e. GDP declined quarter on quarter (for two consecutive quarters). We may experience a temporary year-over-year slowdown early next year.
However, a decline in GDP beyond Oder would be an additional blow to our economy, as it would reduce demand for goods produced in Poland.
Today, Germany is our largest and most important trading partner. Almost 28 percent go there. Export from Poland. It was 29.5 billion euros in the January-April period this year alone. For the whole of 2021, we sold about 82 billion euros worth of goods on our western border.
Germany will probably drag the entire euro area economy into recession, and this will mean another decline in demand for goods produced in Poland. We send almost 60 percent to Euroland. exports, and more than three-quarters to the EU.
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