Economy on the brink: Experts warn of the consequences of Trump's victory!

Economy on the brink: Experts warn of the consequences of Trump's victory!

The German economy is on the brink! While the auto industry is in crisis, other sectors are also affected by problems. According to a report by ZDF The entire economy is struggling with stagnating growth figures and a looming recession. The federal government expects the gross domestic product (GDP) in 2024 to be below that of the previous year for the second time in a row. A review shows that such negative developments since 2008 have only occurred during international crises such as the financial crisis and the corona pandemic.

The situation is alarming: “We have not yet managed to get above the 2019 level,” explains Prof. Timo Wollmershäuser from the ifo Institute. This means that Germany has remained in a phase of economic weakness for five years. But there is a ray of hope: the federal government and the Joint Diagnosis project group expect moderate growth of 0.8 to 1.3 percent in the coming years. Geraldine Dany-Knedlik from the German Institute for Economic Research (DIW) is already seeing signs of recovery, supported primarily by private consumption.

Challenges for the industry

Despite these positive approaches, the industry remains severely affected. High energy prices and structural change are affecting the chemical and metal processing industries. Dany-Knedlik emphasizes that competition from China and the shortage of skilled workers are putting additional strain on companies. “An economic weakness is currently colliding with structural change, which is very challenging for companies in the manufacturing sector,” says Dany-Knedlik.

The unemployment rate is also showing worrying developments. In October 2024 it will be six percent, which is reminiscent of the values ​​during the corona pandemic. Nevertheless, the rate remains low compared to the late noughties. The uncertainty is exacerbated by political developments in the USA: Donald Trump's election victory could further hit German industry as he threatens to impose high tariffs on imports from the EU. This could jeopardize not only direct sales to America, but also business with China, as Wollmershäuser explains.

Psychological effects and consumer behavior

However, low inflation, which has returned to a healthy level of around two percent, could have a positive psychological effect on consumers. “Income increases in recent years are now affecting the consumption behavior of private households,” says Dany-Knedlik. This development could help the German economy to emerge from the crisis.

However, the uncertainty caused by Trump's victory and the collapse of the traffic light coalition could have a major impact on the mood among the population and companies. Dany-Knedlik warns: “The situation is likely to massively increase the uncertainty among German companies and private households and will probably at least noticeably slow down the expected recovery.” A quick clarification of the political situation could be crucial in order to limit the economic consequences.

Overall, one thing remains clear: “The German economy is not doing well,” says Wollmershäuser. The challenges are great, but the hope for a recovery through increased purchasing power and consumer sentiment remains. The coming months will be crucial to see whether Germany can emerge from this crisis.