Bundesbank Warns of Coronavirus Hit to German Exporters
German exporters are likely to suffer from the coronavirus outbreak in China that’s threatening to disrupt global supply chains, according to the Bundesbank.
In its monthly report presented on Monday, the central bank painted a dire picture of the country’s state of affairs, arguing there are currently no signs that growth momentum will pick up in the first quarter. A sharp slowdown in domestic spending, a significant drop in equipment investment and a drag from trade prevented Europe’s largest economy from growing at the end of last year.
The Bundesbank described the deadly virus, which has already claimed 1,770 lives in China alone, as a “cyclical downside risk” for Germany.
China is a huge market for German companies. Outside the European Union, it’s second only to the U.S. in importance, with close to 100 billion euros ($108 billion) of sales a year.
“A temporary decline in overall demand there could damp German export activity,” the Bundesbank said. “Moreover, some global value chains could be impaired by security measures put in place. Delivery bottlenecks in selected industries here would be one consequence.”
The assessment mirrors last week’s warning from the European Commission, which called the epidemic a “key downside risk” to its already subdued growth forecasts. European Central Bank Chief Economist Philip Lane has said the euro-area economy could experience a “pretty serious short-term hit.”
In Germany, domestic demand and construction should continue to support the economy, according to the Bundesbank. And while some surveys suggest the country’s manufacturing slump is starting to ease, it’s still set to be a drag on growth in the first quarter.
©2020 Bloomberg L.P.