GERMANY: ECONOMY HITS THE BRAKES


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Germany’s GDP grew by a feeble 0.6 percent in 2019, its lowest rate since 2013.
Global trade battles weakened exports, as did a general downturn in the world auto market.
Domestic car sales slowed to recession rates, having a ripple effect throughout the industry’s national supply chain. What growth there was is being attributed to construction and consumer spending.
Last year’s economic crawl compares to a 2.5-percent growth rate in 2017 and 1.5 percent in 2018, indicating a continuing, long-term slowdown.
One area of strong growth: Berlin’s apartment rents. The city is growing by 40,000 people a year, rents have doubled over the last decade, and construction hasn’t kept up with demand.
Critics point to companies such as Deutsche Wohnen, a national property developer, which has renovated its buildings and then raised rents to attract affluent tenants.
To keep apartments affordable, the city has frozen rents for the next five years. The intervention is the most dramatic in Germany’s housing market since the country’s reunification more than 20 years ago.
The move already has stalled the city’s construction industry, one of the few strengths in Germany’s current sluggish economy. The freeze also threatens real estate investment in general, already plagued by the city’s stifling bureaucracy and exhaustive planning reviews.
Despite these woes, Germany has announced the largest-ever expansion of its railway system, an €86-billion investment over 10 years.
The plan will buck up the construction industry, accede to political pressure to expand government spending while interest rates are low, and increase mass transit as part of the country’s initiative to discourage single-auto use and reduce carbon dioxide emissions.

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