The crisis in Germany is already hurting Eastern Europe – The Post

The economies of Eastern European countries – such as Hungary, Romania, Poland, the Czech Republic and Slovakia – are beginning to show signs of slowing due to Germany‘s economic crisis: Germany is the most important trading partner for more than half of the member countries, with which it has integrated its industry and shared processes, raw materials and workers, and Eastern European countries are among the most open.

These countries have relatively recent economic development, largely achieved after joining the European Union, which gave them access to the common market and special advantages: above all everything has made them destinations for large amounts of foreign investments by those companies that were looking for places. with low-cost labor where they could open new offices and move certain functions, especially industrial and largely German ones. Now industrial production is declining and the Gross Domestic Product, the best estimate for tracking the general trend of the economy, has lost the momentum it had in recent years , when these countries grew enormously.

This has happened particularly in the automotive sector, with large European companies building factories to transfer less specialized processes. Today in the automotive sector peas about 15 percent of GDP in the Czech Republic, Slovenia and Hungary. A special case is represented by Slovakia, where the share reaches almost a third: it is the country that produces the most cars in the world in terms of population her Volkswagen and Stellantis, among others, have large plants in Eastern Europe, but now these regions have become interesting for large Chinese car companies, which are looking for producers close to the Chinese market. -Europe also with the aim of going around duties imposed by the European Union on electric cars from China.

All this has guaranteed a certain level of growth and development for these countries, with a consequent increase in the living standards of their inhabitants: according to recent estimates by the International Monetary Fund, which most of these countries by 2030. come close to the standards of Italy and Spain in terms of GDP per capita, obviously measured in purchasing power parity, ie the differences in the cost of living are leveled.

However, what is sure of growth and development is now a problem: Germany’s crisis starts from its industry, and is symbolized by The problems of Volkswagenperhaps the most representative company of the country’s industry, which has already announced that it intends to close some factories. As a result, industrial production fell in Eastern countries: compared to October 2023 to October this year it was declining with 5.8 percent in Hungary, with 3.8 percent in Romania and with 1.3 in Poland. In other countries it was still growing, but the general trend is slowing down.

The impact of all this on the GDP of these countries is still small. Both because it takes time for the slowdown to be transmitted from the industry to the whole economy, and because according to most forecasts the economic growth of recent years is closely linked to good internal consumption performance, which continues to benefit from the largest source. because that growth has been promised to the residents so far.

The latest estimates from the European Commission recording a decline in economic growth in these countries already in 2024, and it is expected to increase again next year. The growth rates, compared to those of the largest countries, are still good: in 2024 Poland will grow by 3 percent, Slovakia by 2.2, Romania by 1.4, the Czech Republic by 1. Hungary is the the worst, which will grow by 0.6 percent.

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