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German exports on the ropes as China overtakes

German exporters took a double hit of bad news Wednesday, with latest figures showing China had snatched Germany's title as the world's biggest exporter and industry warning the sector would not recover from the recession until 2014.

German exports on the ropes as China overtakes
Photo: DPA

The Wall Street Journal reported on its website that China had exported €663 billion worth of goods in the first 10 months of 2009, compared with Germany’s €638 billion.

The paper cited figures from the Geneva-based market research firm, Global Trade Information Services.

Meanwhile, in a sign Europe’s biggest economy is still only limping towards recovery, the latest foreign trade report by the BDI Federation of German Industries found Germany’s export sector would not return to its former strength until 2014.

The report found that after slumping 18 percent in the past year, exports would recover just four percent in 2010.

“Germany’s export industries are on the road to improvement, but the recovery process will take longer,” BDI president Hans-Peter Keitel wrote in his introduction to the report. “The export industries had to battle through a tough setback in 2009.

“At this rate, we won’t get back to pre-crisis levels until 2014.”

The figures were based on a large survey of German businesses across a wide range of sectors.

Before the global economic crisis struck in 2008, the growth in German exports was humming along at eight percent a year, the report found. Germany has traditionally been the world’s biggest exporter and one third of jobs here rely on exports.

Risks to the German economy persisted, the report said. The cheap money flowing from the expansive monetary policies of central banks could spark a new financial crisis.

Furthermore, some countries’ stimulus programs were running out. And growing protectionism through “buy national” programs were also a danger, the BDI warned.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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