The ongoing decline in Germany’s economy, which has been a trend for several quarters, is increasingly affecting other countries, including Serbia, due to its significant economic ties with the largest economy in Europe. According to recent Eurostat data, Germany experienced a 0.1% drop in economic activity in the second quarter of 2024, continuing a pattern of weak performance.
Germany’s Economic Downturn:
- Second quarter decline: Germany’s economy contracted by 0.1% in the second quarter of 2024 compared to both the previous quarter and the same quarter in 2023.
- First quarter results: While the first quarter of 2024 saw a slight 0.2% growth compared to the last quarter of 2023, it also marked a 0.1% decrease compared to the first quarter of the previous year.
- Long-term decline: The German economy has been on a downward path, with a notable year-on-year decline of 0.2% in the last quarter of 2023.
Impact on Serbia:
- Economic dependence: Germany is Serbia’s largest trading partner, with 59.9% of Serbia’s total trade occurring with EU countries. In June 2024, Serbia exported goods worth over €2.1 billion to Germany, while imports totaled €2.5 billion, resulting in a trade deficit of around €400 million.
- Industrial ties: Many German companies operate in Serbia, particularly in less developed regions, producing parts like cables and car components for German factories. A downturn in Germany’s industrial output could lead to reduced production in Serbian factories, threatening jobs, especially in areas with limited alternative employment.
- Migration and workforce issues: The decline in Germany’s economy could also impact Serbian workers in Germany, particularly in sectors like healthcare. If Germany faces a deeper recession, foreign workers might be the first to lose their jobs.
Expert insights:
- Ljubodrag Savić: The professor of economics notes that Germany’s economic troubles, including workforce shortages and the relocation of companies to the U.S., have broader implications for countries like Serbia that are economically intertwined with Germany.
- Danilo Šuković: The economist emphasizes that the reduction in German demand for Serbian goods could lead to decreased production in Serbia. He also highlights the risk of a domino effect, where an economic downturn in one country triggers a broader crisis. However, Šuković does not expect immediate factory closures but warns that prolonged and deeper declines could have more serious consequences.
While the current situation is not yet alarming, continued economic weakness in Germany could have significant repercussions for Serbia, both in terms of trade and employment.
