German trade surplus shrinks amid Ukraine war and energy crisis

Germany's much-vaunted trade surplus shrank in 2022, official data showed Thursday, as soaring energy prices in the wake of the Ukraine war pushed up the cost of imports.

Published: 2 February 2023 11:09 CET

Cargo ships in the harbour in Lubmin, Mecklenburg Western-Pomerania. Photo: picture alliance/dpa | Stefan Sauer

Germany exported goods to the value of €1.56 trillion, up 14 percent on a year earlier, federal statistics agency Destatis said in seasonally adjusted figures.

But imports rose by more than 24 percent to €1.48 trillion, resulting in a trade surplus of €76 billion.

Destatis said it was “the lowest surplus” since 2000 and down by more than half compared with last year’s €173.3 billion figure.

The bill for imports rose much more strongly “on account of the sharply increased prices of energy” following Russia’s invasion of Ukraine, the agency said.

It is the fifth consecutive year that the trade surplus has narrowed in Europe’s biggest economy, it added.

The United States remained the top destination for “made in Germany goods”, while China was once again the largest source of imports.

The shrinking surplus in export champion Germany comes at a time of growing concern about the competitiveness of European companies in the face of US plans for a major subsidy package to green its economy.

The European Union is working on proposals to counter the threat, including a possible relaxation of state aid rules.

Germany’s BDI industry association on Thursday called for “swift, concrete results” on the issue.

It also urged the government to pursue EU-level trade agreements with “important partners” such as Latin American countries, India or Indonesia to diversify trade ties.

“The aim must be to drive forward the internationalisation of the German economy,” it said.

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Intel’s delay

The US chip giant announced Monday it is postponing plans for its project in Germany for two years as it focuses more on the United States.

This is a blow to Berlin, which had pledged 10 billion euros ($11 billion) – a third of the cost – to build the production plant in the eastern city of Magdeburg.

While Intel’s own struggles are the immediate cause for the delay, it has also fuelled concerns that Germany is becoming less attractive as a place to do business.

In this year’s ranking of the most competitive economies by Swiss business school IMD, Germany slipped two spots to 24th, with taxes, bureaucracy and poor infrastructure cited as major handicaps.

Volkswagen stalls

Auto titan Volkswagen announced earlier this month it could take the unprecedented step of closing factories in Germany for the first time in its 87-year history.

Europe’s biggest carmaker is struggling with high costs, problems in the transition to electric vehicles, and fierce competition from local rivals in key market China.

Employees of German car maker Volkswagen (VW) protest at the start of a company’s general meeting in Wolfsburg, northern Germany, on September 4, 2024. Photo by Moritz Frankenberg / POOL / AFP

A week after VW’s shock announcement, BMW announced it was recalling 1.5 million vehicles due to problems with their brakes and downgraded its outlook for the year, also citing problems in China.

Steel storm

Efforts by Thyssenkrupp to spin off its loss-making steel division and get its business back on track ran into trouble last month when a host of senior executives quit in protest at the what they said was the unacceptable behaviour of the group’s CEO.

The row centres around plans to restructure the division, which operates Europe’s largest steelworks in Duisburg, western Germany.

The conglomerate wants to separate the steelmaking unit from its other activities, which include building submarines, as it faces higher manufacturing costs and competition from cheaper Asian steel.

It already announced that it plans to cut jobs in Duisburg and reduce production.

Firms face being gobbled up

Deutsche Bahn announced last week that logistics unit Schenker, traditionally one of its most profitable arms, is to be sold to Danish group DSV, with unions fearful it could lead to thousands of job losses in Germany.

Meanwhile Italian bank UniCredit is targeting a takeover of Commerzbank after building up a nine-percent stake in Germany’s second-biggest lender, a development that reportedly blindsided Berlin and has angered German unions.

Still some say such takeovers also highlight that German firms remain attractive, despite the woes of the broader economy.

Poor indicators

After starting the year on a positive note, recent surveys – from business morale to consumer confidence – have been on a downward trend, denting hopes of a strong rebound.

Some economic institutes have cut their forecasts, and now expect either stagnation or a slight recession for the whole year.

In its last official forecast in April, the economy ministry still expected growth of 0.3 percent this year, but it may downgrade that forecast when it updates the figure soon.

Commenting after a recent batch of negative data, ING economist Carsten Brzeski summed up Germany’s problems: “Years of stagnation, and underestimating technological trends and international competition do not come without consequences.”

By Sophie MAKRIS