FX.co ★ Investors losing trust in Germany’s economy

Many investors are frustrated with the dismal state of affairs in Germany’s economy. Does it mean that the powerhouse of the eurozone’s economy has been losing momentum? As investors want to play safe, they are now revising their portfolios.

According to a survey by the ZEW Institute, investor confidence in Germany's economy has worsened. The reason is the uncertain prospects of the EU’s largest economy. ZEW analysts estimate that the decline in confidence is recorded for the first time in a year.

The think tank notes that the investors' expectations barometer sank from 47.5 to 41.8 points in July. The bearish trend is attributed to the poor performance of the industry and relevant economic metrics. Besides, experts pointed to the grim economic outlook for Germany.

In the meantime, German exports have contracted more than estimated on the back of political uncertainty in France and ambiguity regarding the ECB’s future monetary policy, ZEW analysts explained.

Analysts at Bloomberg Economics reckon that Germany's economy is recovering too slowly. According to Bundesbank data, Germany’s GDP will grow by only 0.3% in 2024. Additionally, half of the projected 7% reduction in manufacturing capacity is due to structural reasons. A full recovery after two years of stagnation is a tough, almost unattainable challenge, Bloomberg Economics concludes.

In June, German Deputy of the European Parliament Gunnar Beck admitted that the domestic economy had to deal with negative consequences due to anti-Russian sanctions. In this context, Germany could lose between 1% and 1.5% of annual GDP growth. This trend could entail heavy losses of 1.5% or more over the next few years. The same issue is also relevant for other EU countries, including Eastern European states, the deputy added.