Market Overview

Germany after Merkel will face three key challenges, Goldman says

Germany after Merkel will face three key challenges, Goldman says

Germany is about to embark upon a new political chapter that will have three main challenges, Goldman Sachs said Friday. Chancellor Angela Merkel will leave office this fall following 16 years in power. Though Goldman believes she will leave Europe’s largest economy well-placed to recover from the coronavirus pandemic, the U.S. investment bank said climate change, trade frictions and an aging population will be the biggest obstacles in coming years.

Germany has put in place some of the most ambitious climate targets in Europe, seeking to cut its greenhouse gas emissions by 65% from 1990 levels by 2030. The 27 EU nations together vowed to reduce emissions by 55% over that period. Goldman said, “Germany’s export-oriented economy looks vulnerable to ongoing de-globalisation trends.”

Germany has become Europe’s economic powerhouse thanks to its exports. In 2019, exports reached an all-time-high of 1.33 trillion euros ($1.57 trillion). This number dropped to 1.21 trillion euros in 2020 amid the Covid pandemic, according to data from its national statistics office. There are concerns that recent issues over supply chains, calls for protectionism, the U.K.’s departure from the EU and an overall stagnating level of global trade will hamper German exports.

“Germany’s potential growth rate is in the middle of the G-7 pack but will come under particular pressure through demographic change,” Goldman said. Analysts said the country “will be affected more strongly by population ageing than most advanced economies, with the dependency ratio rising sharply in coming decades.” This will bring fiscal challenges as an older population will likely mean more costs with health and social security services.

Germany after Merkel will face three key challenges, Goldman says, CNBC, Aug 6

Article Rating
Rate this post