Germany’s Ifo Institute for Economic Research has downgraded its forecast for the German economy to a growth rate of 0.5% for 2019. That is more optimistic than some other forecasts, but it means the largest economy in Europe is close to recession.
The Ifo researchers report of its August forecast was headlined “German Economy at Risk of Recession.” The report says, “Economic growth this year is likely to amount to 0.5% over the previous year – a considerably lower rate than in the past years of the upturn. The economy is likely to gradually return to normal next year, with growth recovering to 1.2%.”
As Europe’s largest economy by far, its growth is essential to the region, which already may be under pressure due to the effects of Brexit. Germany also is under pressure as a large trade partner with China and the United States. The trade war between those two nations may well have an impact on its economy going forward.
The other effect of the German economy is its size in relationship to the global economy, and therefore its potential harm to global gross domestic product. Germany sits behind only the United States, China and Japan in the size of its economy.
The German problem is another symptom of what could become a slowing in the U.S. economy. It needs its trade partners to be healthy because of the demand for exports they drive. Without China, the need for trade with Germany will become larger.