This Friday, the German central bank sharply lowered the growth forecast for Europe’s leading economy for 2024, from 1.2% to 0.4%, which is mainly due to the weakness of exports.
For 2023, the Bundesbank was less pessimistic and anticipated a recession of 0.1%, when it had previously predicted a recession of 0.3%.
“The economic recovery is experiencing a certain delay,” the Bundesbank said in a statement.
“Weak foreign demand constitutes the main brake on the industry, in addition, private consumption remains contained and the increase in financing costs makes investment difficult,” the institution added, ensuring that the situation “will become clearer” at the beginning of 2024.
The economist Manuel Caldeira Cabral warns, in statements to TSFthat this enormous slowdown of the German economy will have an impact on the Portuguese economy.
“When the largest economy in the EU collapses, and it collapses like this, if these forecasts come true, it will have an impact on the Portuguese economy. Portugal exports a lot to Germany and the Portuguese industry is very integrated with the German export industry. i.e. “Many of German exports have components or parts that are manufactured in Portugal, therefore, German braking not only has the effect of reducing German domestic demand, it has the own causes of German braking that will be reflected in our industry.” he explains.
Manuel Caldeira Cabral also points out that this “German cooling” will also be felt in other foreign markets, stressing that it is above all “bad news” for Europe.
“Portugal also has other sectors that depend less on Germany: exports, services that far exceed tourism exports. Tourism exports today represent less than half of service exports, but there are service exports that are less linked to German exports and also have other markets: the Spanish, French and English markets, which are of great importance in different sectors. However, the German slowdown will obviously also have effects on the Spanish economy and the French economy. In this sense , is bad news for Germany, first of all, for Europe and obviously also for Portugal,” he argues.
The professor from the University of Minho therefore anticipates a situation that is not very “favorable” for the Portuguese sector.
“For the Portuguese economy, we must continue to expect growth higher than that of Europe – as has happened in the last eight years, apart from the years of the pandemic – but even growing above, with a reasonable growth differential, we will continue to be influenced because of the European situation and we have to prepare so that next year the situation will not be very favorable,” he laments.
Despite a less than encouraging scenario, Manuel Caldeira Cabral identifies a point in favor of the Portuguese economy.
“Fortunately, the balanced situation of the public accounts, the positive balance and the budget situation with a certain stimulus to internal demand guarantee a mitigation of the economic situation, of the external effects on the situation of the Portuguese economy and also guarantee that, Even if there is a cooling in economic growth, it is not about moving towards high deficits, because we are starting from a situation of balance,” he emphasizes.
The German economic model, which is based on a strong export industry, is suffering from a darker international situation and rapidly rising interest rates in the euro zone, which penalize consumption and investment.
Energy prices are too high compared to their competitors, especially since the war in Ukraine and the end of supplies of cheaper Russian gas, harming energy-intensive activities trying to recover energy levels. previous production.
The German Government continues to expect Gross Domestic Product (GDP) to increase by 1.3% next year, while the International Monetary Fund (IMF) forecasts a recovery of 0.9%.
Regarding inflation, the Bundesbank predicts that the situation will continue to improve, as in recent months, aiming for 2.7% in 2024, according to the harmonized consumer price index.
Source: TSF
