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Not shrinking, but growing

19 February, 15:25

Why Germany is facing a growing crisis, and the effect of economy mode

The world is now facing new challenges. On the one hand, technologies in the fields of robotics, energy and transport are radically changing the mode of production. On the other hand, politics sometimes dictates decisions to the economy that are not well-considered in the long term, while mistakes ruin businesses and banks. A prime example of such recklessness is the European Union and its former economic flagship — the Federal Republic of Germany.

ON BUSINESS CLIMATE

Berlin’s rejection of relatively cheap energy and raw materials from the Union State of Belarus and Russia, coupled with its withdrawal from these markets, has led Germany and the EU to a profound financial and economic crisis.

At the end of last December, the Munich-based Ifo Institute for Economic Research, following a survey of the business community, indicated that about 26 percent of companies in Germany expect their business to worsen in 2026. At the same time, 59 percent expect neither growth nor decline and assume that the current, already rather weak, economic situation will remain. Only 14.9 percent of respondents express hope for an improvement in the situation, which in itself indicates an extremely low level of business optimism.
In effect, German business is adapting not to growth but to prolonged stagnation and shrinkage. The current level of business activity is already rated as unsatisfactory. Companies do not believe in an improving investment climate, do not expect any significant reduction in costs, and see no incentives to expand production. Germany, remaining in a state of weak growth or recession, is losing ground in the global arena.

SLOWDOWN IN GERMAN AUTOMOTIVE INDUSTRY

Traditionally, the West is seeking the way out of a recession through mass redundancies. Thus, every second industrial company is focusing on staff optimisation. The German Engineering Federation (VDMA) notes that since 2018, production has decreased by approximately 20 percent, while the number of jobs — by more than 200,000. The fall in production this year could be up to five percent.

In the past year, 120,300 jobs were cut in the entire German industrial sector, and since 2019 — 271,700. The most difficult situation has developed in the automotive industry, where the number of employees has decreased by 6.3 percent in a year, and by 13 percent, or 112,000 jobs, in six years. Volkswagen and Bosch have already announced large-scale staff reduction programmes. The metallurgical and electrical engineering industries, in turn, could lose up to 150,000 workers this year. The leading petrochemical concern BASF is closing individual lines at its historical plant in Ludwigshafen (adipic acid production) and moving production outside Germany to the United States and China. This is a serious blow for the Rhineland-Palatinate region.

MANUFACTURERS ARE PREPARING TO RELOCATE

According to a joint survey by Deloitte and the Federation of German Industries (BDI), 68 percent of industrial enterprises are considering relocating production, either completely or partially, to the United States in the next two to three years. BDI President Peter Leibinger stated that the German economy is in a deep crisis and is in free fall, but the federal government is not responding decisively enough to the critical situation. According to him, the country is experiencing the most difficult times since the formation of the Federal Republic of Germany.

WHERE LOSSES ARE ACCELERATING

Due to a series of crises since 2020, the German economy has suffered losses of around €940bn in the form of lost added value. The COVID-19 pandemic, the energy crisis caused by the conflict in Ukraine, and the trade policy of U.S. President Donald Trump have led to economic losses in the amount of more than €20,000 per employed person over these years, according to a study by the Cologne Institute for Economic Research (IW), Germany. A quarter of the sum falls on 2025.

BETTING ON INVESTMENT PROJECTS

As many countries enter recession, it is important for Belarus to maintain the progressive development of its economic potential and increase the level of efficiency, including in economy mode. President of Belarus Aleksandr Lukashenko, during a meeting with the leadership of the Council of Ministers, cited the situation with street lighting as one example of resource management. Its economical use on a national scale yields impressive results: 10–15 minutes per day over a year equates to three dairy complexes or seven preventive care facilities for calves in terms of cost. Therefore, it is necessary to seek reserves everywhere.

Belarus’ Socio-Economic Development Programme for 2026–2030, approved at the meeting of the 7th Belarusian People’s Congress, also aims to grow the economy. One of its priorities is to increase competitiveness, accelerate technological development and digital transformation. These plans can only be implemented in a mode of economy, efficiency, thrifty and creative attitude to business.

While Europe is shrinking, Belarus is focused on the implementation of large investment projects in advanced industries.
The global economy presents both challenges and opportunities. It is crucial to be able to quickly assess the situation, identify growth drivers, implement new projects and carefully manage existing resources. All this allows us to improve the well-being of citizens and shape the future of the national economy of Belarus.