Germany keeps Europe going

Growth in world economy has dwindled, and a debt crisis has tried Europe. With the arrival of spring, however, forecasts indicate that Germany will most likely recover with only a few bruises.

This is good news for Europe as a whole, as the importance of Germany – the continent’s largest economy – has become more and more emphasised in turbulent times. Germany’s economics minister Philipp Rösler has ensured that the country will continue to be the guarantor of growth and stability in the EU.

Despite the improvement in economic prospects, Germany too may have to settle for more modest growth in the upcoming years. The government is expecting 0.7 per cent growth for 2012; last year the equivalent number was three per cent. In 2013, the growth is expected to accelerate to 1.6 per cent.

Businesses have faith in the future

Indicators measuring companies’ trust in the future have also improved in early 2012. Especially Germany’s key export industries – car manufacturing, electronics and engineering – show optimism.

Last year Germany’s exports reached a new record: 1,060 billion euros. More than half of its trade was directed towards companies outside of the EU.

German companies are getting more orders from beyond the Eurozone, and exports are growing. Markets in emerging economies such as China have a strong pull, and exports to the US are also on the rise. At home, private spending and construction is expected to add a jolt to the economy.

Risks beyond borders

The strength of Germany’s economy is illustrated by the fact that unemployment numbers are at their lowest point in 20 years. The country’s central bank, Bundesbank, estimated that the largest potential threats come from beyond the country’s borders.

Debt crisis in the Eurozone continues. Should the situation in the Persian Gulf escalate, the price of oil could skyrocket and freeze the world economy.

Germany’s economy is based on its strong production industries and notable investments in research and product development. German companies have a solid market share in industries such as car manufacturing and chemistry.

Germany is known for large companies that manufacture top-quality products. Small and mid-sized companies are the economy’s second pillar.

”Germany has highly qualified employees. Labour, energy and manufacturing costs, on the other hand, are high compared to other countries. As a result, businesses are expanding to emerging markets where the costs are lower,” says Walter Morris, Finnair Cargo’s regional sales manager in Germany.

Growing demand for air cargo

The improvement of economic prospects is also visible in air cargo.

”Confidence towards the German economy is increasing. The growing economy and expansion towards emerging markets contribute to an increasing demand for cargo. Finnair benefits from stable growth,” Morris says, adding that 2012 is expected to be better than 2011 in most areas of business.

Among the products Finnair transports from Germany to other countries are spare parts for cars, various electronic components for different industries, and medical devices for hospitals. Frankfurt is the country’s most important airport for cargo by a wide margin; last year two million tonnes of cargo travelled through it. It’s Europe’s second largest hub for air cargo, right after Paris.

”We can see a trend of decentralisation in Germany, which brings the added benefit of distributing cargo volume to more hubs during peak seasons,” Morris says.

Published March 12, 2012

Category: Market updates