When did Germany become Europe's largest economy?

German economic boom is coming to an end

After two boom years in a row, the German economy has shifted down a gear. The gross domestic product (GDP) increased last year by 1.5 percent, after 2.2 percent in each of the two previous years, as the Federal Statistical Office announced on Tuesday in Berlin based on preliminary data.

"The growth dynamic in 2018 was disappointing. That should be a warning sign for this year as well," said the general manager of the German Chamber of Commerce and Industry (DIHK), Martin Wansleben. It is all the more important to do your "homework" with a view to your home location. Wansleben called for tax relief for companies in order not to fall behind in international competition. "In addition, companies need a noticeable reduction in bureaucracy and a modern infrastructure. This is the only way companies can successfully invest in the necessary digitization."

The German economy narrowly missed a recession feared by some experts. According to the Federal Statistical Office, GDP is likely to have increased slightly between October and December 2018. There was no minus, but rather "a small plus". In the summer the economy had shrunk by 0.2 percent. Experts speak of a technical recession if GDP falls for two quarters in a row. This last happened at the turn of the year 2012/13.

Ninth consecutive year of growth

2018 was the ninth year of growth in a row since 2010. At that time, Europe's largest economy had to recover from the deep recession in 2009 as a result of the global financial crisis.

According to the Federal Office, the economy was once again supported by consumers' willingness to buy last year. In addition, there were increased investments by many companies in equipment, buildings and other systems as well as the construction boom. The state's consumer spending, which includes social benefits in kind and employee salaries, also increased, according to the information.

Less exports, more imports

Exports turned out to be a growth driver. According to preliminary calculations, imports grew faster than exports of goods and services. The trade disputes fueled by the USA are putting a strain on the export business. In addition, there were problems with the automotive industry, which is so important for Germany, with the introduction of the new WLTP emissions and consumption standard. As a result, manufacturers had to cut back production at times. That had weighed on the economic development in the third quarter.

According to calculations by the Kiel Institute for the World Economy (IfW), the low water in the Rhine also slowed growth. "Overall, the low water is likely to have dampened the growth rate of gross domestic product by 0.2 percentage points in the third quarter of 2018 and by 0.1 percentage points in the fourth quarter," said IfW economic director Stefan Kooths.

Positive effects for the tax authorities

The tax authorities continue to benefit from the positive economic situation for years and the persistently low interest rates. According to calculations by statisticians, the German state was able to earn more money than it spent in 2018 for the fifth time in a row. The balance of the federal, state, municipal and social security funds accounted for 1.7 percent of GDP, after 1.0 percent in the previous year. Germany last recorded a deficit, albeit a minimal one, in 2013.

Economic research institutes and bank economists had recently lowered their economic forecasts for Germany. However, they assume that the upswing will continue this year. The Federal Ministry of Economics was confident: "The further increase in disposable income, which received an additional boost at the turn of the year due to the relief in taxes and duties, speaks in favor of a positive development in private consumption in the coming months." Private consumption accounts for a good half of total economic output.

ul / hb (dpa, rtr)