German exports are losing their share in world markets and losing it to China. The rise in energy prices is one of the main reasons. This is stated in the monthly report of analysts of the Bundesbank, which is the central bank of Germany.
"More than three quarters of the losses of German exports from 2021 to 2023 are associated with a deterioration in the competitiveness of German exporters. Competitiveness has declined in many industries. This points to fundamental structural problems in the German economy," the Bundesbank reports.
The central bank of Germany associates this situation with demographic changes, a shortage of qualified workers, an increase in unit labor costs, as well as a growing volume of bureaucratic delays.
"Mechanical engineering, the electrical industry and energy-intensive industries such as the chemical industry have contributed the most to the decline in competitiveness. The Covid-19 pandemic and the Russian-Ukrainian conflict disrupted supply chains and caused an increase in energy prices, which created an additional burden on exports of energy—intensive sectors of the German economy," analysts at the German bank write.
Germany has lost ground and is currently lagging behind other advanced economies, according to the Bundesbank.
"Since 2019, in relations with its most important trading partners, the German export industry has tended to lose a large market share in the very areas where China has gained ground," the analysts explained.
Another factor that caused Germany to lose world market share was the weak demand for products dominated by Germany, especially cars and aerospace equipment.
The Central bank of Germany believes that urgent actions are needed to increase competitiveness.
"In particular, it is necessary to create a reliable structure that promotes employment and investment. To this end, incentives to work should be strengthened, barriers to immigration of skilled workers and unnecessary bureaucracy should be reduced, tax incentives for private investment should be increased...", the document says.
It is extremely important to effectively implement the energy transition and help companies diversify their supplier networks through new free trade agreements, analysts believe.
"Only bold reforms will allow Germany to improve its position in the global market," the Bundesbank added.
As EADaily reported, the European Union plans to conclude a free trade agreement with the MERCOSUR Trade and Economic Union of South America by the end of the year. It will be beneficial to the German industry, but it will create problems for everyone else, says Konrad Poplavski, an expert at the Warsaw Center for Oriental Studies (OSW).
"Until now, Germany has lived by specializing in certain industries and exports, by reducing its own agriculture. In this sense, the MERCOSUR agreement reflects this pattern. It is to make the market The EU is accessible to the agriculture of South America. And in return — their market for the EU, but in particular for the German industry, " the expert noted.