Germany dodges the recession but its economy stagnates

Germany dodges the recession but its economy stagnates

The largest European power remains at 0.0% burdened by the export and the GDP of the eurozone grows only to 2014 levels

 Germany narrowly escapes the recession after meeting on Thursday the figures for GDP growth in the fourth quarter of the year that stagnated by 0.0% , according to the Federal Statistics Office. It technically avoids the recession, after having registered a period of negative growth in the third quarter (-0.2%), which represents a significant setback with 2017 and a decrease in the estimates that had been made by different German and international organizations .

In the whole of the year, Germany recorded a growth of 1.4% , one tenth less than initially forecast, which is the weakest expansion rate of the largest European power and second largest customer in Spain since 2013, when it grew by itself 0.5%. Since then, everything had been positive data for the Germans, fulfilling the longest growth phase since 1966.

  With the slowdown of this fourth quarter, they attribute it to the negative impact of external factors such as the uncertainty surrounding the 'Brexit' and the commercial tensions with the United States. Taking these factors into account, the German government had already lowered its growth forecast for this year to eight tenths of a point by the end of January, leaving it at 1%, the weakest expansion since 2013.

Even the International Monetary Fund (IMF) had foreseen more growth than the Government, despite its pessimism. The agency estimates an advance of 1.3% in 2019 and maintains 1.6% by 2020. What is positive is the occupation data, since the German statistical office highlighted that in the fourth quarter of 2018 Germany had 45.2 million employed, which means an annual increase of more than 507,000 people, 1.1% more than in 2017.

Fall of the eurozone
The data published on Thursday by Eurostat also confirm that the eurozone economy grew by 1.8% in 2018 , its lowest advance since it left the crisis in 2014 and six tenths less than in 2017. The causes focus on the worsening of the economic situation in Germany and Italy , as well as the uncertain international context.

In the fourth quarter, the economy advanced by only 0.2%, which represents the annual growth of 1.8%, one tenth below the forecast by the European Commission, which has already warned of a slowdown that will last as long as This year, due to trade tensions between the United States and China, the greater political uncertainty motivated by the 'Brexit' and the weakness of global trade.

Impact in Spain
In this context, Spain is the best unemployed country within the large economies of the euro, with an increase in GDP in the fourth quarter of 0.7% and 2.5% throughout the year , more than one point above Germany and eight tenths higher than the euro area average, according to INE figures advanced a few weeks ago.

The problem is the forecast for 2019, which although the government figures at 2.2% for 2019, could be resented by the slowdown in Germany , in addition to the factors already planned as the global slowdown and, above all, the 'Brexit' . And it is not only the United Kingdom that buy Spanish products, Germany is the second largest customer for our country , so a moderation in imports would directly affect the Spanish economy.

"The stagnation of Germany is the biggest surprise of the evolution data of the European economy", recognizes this newspaper Raymond Torres, director of Conjuncture and International Economy of Funcas . Above all, explains, because it is not known if it will be something temporary motivated by reasons such as the change of regulations in the automotive sector, or something structural because the 'European locomotive' lives on its exports and affects more than any other country the evolution global. In addition, it is close to full employment, something very positive but that could diminish its capacity for growth.

Spain will be one of the "main affected" because Germany is its second client behind France and taking into account that the slowdown suffered at the end of 2018 comes from a drop in exports. "If Germany entered recession it would affect even more than the 'brexit' , but I do not believe that the German government will reach that point, will take measures to stimulate the economy," Torres explained.

The countries that grow the most
Returning to the European economy, the Eurostat data reveals that the main quarterly increases occurred in Lithuania (1.6%), Cyprus, Latvia and Hungary (1.1%) , while the lowest rates were observed in Italy ( -0.2%) and Germany (0.0%). In interannual rate, the highest increases were in Latvia (5.5%), Hungary (4.8%) and Poland (4.6%), and the lowest in Italy (0.1%), France (0, 6%) and Germany (0.9%).

Despite taking the slowdown, the European Commission insisted on Thursday that the economy has grown in Europe for 23 consecutive quarters and will continue to do so, although at a slower pace. Above all, they are positive in terms of better labor market conditions, favorable financing and a slightly expansive fiscal position.