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Once the EU's Economic Engine, What Is Slowing Germany Down?

Global trade uncertainties, the risk of "no-deal" Brexit and the EU's stringent car emissions standards are major reasons, says commentator

By Xu Mouquan Updated May.16

The European Commission projected Germany’s economy to grow at a mere 0.5 percent in 2019, the second lowest in the EU. This marks the second time its economic growth outlook was reduced within the year. In February, the EU revised its growth forecast from 1.8 percent to 1.1 percent.
Dai Shangyun, a staff commentator for opinion.haiwainet.cn, wrote that the main reason for the revision is the uncertain international trade environment. Germany is the world’s third-largest exporter. With export trade taking up some 40 percent of its GDP, it’s easy to see how trade uncertainties affect Germany. 
And Trump’s threat of slapping a 25 percent tariff on German-made automobiles makes the situation worse. If implemented, it could drag Germany’s GDP down by around 0.2 percent, Dai warned.
The country is also unnerved by the looming risk of a “no-deal” Brexit, said Dai. According to a Deutsche Bank Research report, Germany’s exports to the UK registered their third consecutive yearly decrease in 2018, down by seven percent compared with 2015. Pharmaceutical exports experienced the largest drop at 40 percent between 2015 and 2018, while car exports decreased by 20 percent. 
Tariffs on imports and exports will hike abruptly in the wake of a hard Brexit scenario, further dampening the decreasing exports, the commentator noted. 
The last reason is the curbing effect of EU’s more stringent emission standards on Germany’s automotive sector, which accounted for 20 percent of its national economy in 2018. 
In response to the emissions scandal of Volkswagen, the EU implemented a new emissions standard WLTP (worldwide harmonized light vehicles test procedure) in September 2018, which caused many German automakers to suspend production in the third quarter to make adjustments. As a result, Germany’s auto production was down by a year-on-year 24 percent for the month.
While the auto sector could soon rebound after adapting to the WLTP, the International Monetary Fund still projects the negative impact will last into 2019, Dai wrote.