NewsAmid economic stagnation and possible company distress, German investors brace for long haul

Amid economic stagnation and possible company distress, German investors brace for long haul

Chancellor of Germany Olaf Scholz
Chancellor of Germany Olaf Scholz
Images source: © PAP | PAP/EPA/SHAWN THEW

12:26 PM EST, February 11, 2024

"The bad news keeps piling up. Following a contraction in the economy during the last quarter of the previous year, the initial surveys for 2024 suggest that relief isn't imminent," Bloomberg reports.

As stated by Brian Mangwiro, a fund manager with Barings, "Germany is indeed in a difficult predicament," as quoted by the agency.

"Significant manufacturing economies worldwide are slowing down. However, the situation in Germany is further aggravated by escalating energy costs and competitive challenges faced by the automotive sector against China," he added.

Germany's industrial sector encounters obstacles

Germany's industrial production dropped by 1.6 percent month-on-month in December. Experts had predicted a more optimistic figure – negative nonetheless but a lesser -0.4 percent. The preceding reading was significantly better, standing at -0.2 percent.

The statistics suggest that German companies have drastically cut their industrial production. This represents the fourth consecutive fall and the steepest since March 2023.

In mid-January, GDP figures for Germany were released. Germany's Gross Domestic Product decreased by 0.3 percent in 2023.

Bloomberg News reports that companies are struggling to repay or redeem loans and bonds amounting to more than $13.6 billion, based on data they compiled.

The agency adds that a report by consulting firm Alvarez & Marsal indicates that about 15 percent of businesses in Germany are currently in trouble, which "captures the highest ratio in Europe".

Approval of the German budget

The budget, approved on Friday with 388 votes in favor and 279 against according to ARD television station, allows for expenditure of approximately 477 billion euros (around 535 billion dollars) and fresh debts worth 39 billion euros (about 44 billion dollars).

Originally, the budget was scheduled for approval in December 2023. However, a pronouncement by the Federal Constitutional Court disrupted the coalition government's plans, which were then compelled to address billion-euro deficits within a short span.

Related content