Alarm signals from German exports: An empirical review of German export development

As a result, the growth contributions of exports have fallen significantly from 1.8 percentage points between 2000 and 2015 to 0.8 percentage points from 2015 and to just 0.3 percentage points after 2019. Exports are therefore hardly an engine of growth for the German economy anymore.

A sustained deterioration in exports after 2015 is also evident according to the OECD export performance indicator for goods and services, which measures a kind of country-specific global export share and can therefore be interpreted as a result-oriented measure of the international competitiveness of a country's exports. Two reasons for the weakness of German exports after 2015 can be discerned: Firstly, the imports of Germany's sales markets (the countries that import from Germany) grew by 2.8 percent per year, significantly less than before, due to the weaker development of the global economy and global trade in particular. Secondly, German exports were unable to keep pace with this market potential and only grew by a disproportionately low rate of 1.5 per cent on an annual average in dollar terms. As German real exports therefore only grew at around half the rate of their target markets, there was a considerable loss of market share, which is reflected in the deterioration in the export performance indicator.

In an international comparison, Germany has had the third-worst export performance development since 2015 among the countries surveyed by the OECD, and the same applies to nominal global export shares. Although most of the major G7 countries share this fate, other industrialised countries such as Sweden and Denmark do not. In contrast, some emerging countries such as India, China, Poland and Vietnam have shown significantly improved export trends.

The cause of this worrying finding appears to be less a deterioration in price competitiveness (which is barely discernible overall), but rather a sharp deterioration in non-price competitiveness in recent years, which also includes aspects such as bureaucracy, infrastructure deficiencies and skills shortages.

Germany's export weakness can be interpreted as an erosion of its former strengths. German exports  were particularly weak in some important markets such as the United Kingdom (UK) and China. In addition, after 2015, Germany's position has been crumbling in the five most important global import markets and also in important emerging markets, where China in particular has mostly gained market shares. Overall, Germany has lost import share in 131 out of 193 importing countries since 2015. Some of the losses can be explained by protectionism and geopolitics, for example with regard to the deterioration in exports to the UK due to Brexit and to Russia and China, mostly due to geopolitics. The biggest losses also tend to be recorded in product groups that are traditionally important for Germany: motor vehicles, machinery, chemicals and pharmaceutical products.

If this trend continues, in a world of increasing protectionism and weak growth, there is a risk that the loss of market shares will lead to an absolute decline in German exports in the future and that the role of exports as an important driver of economic growth could be durably impaired. To mitigate this risk, vigorous reforms are needed to improve the price and non-price competitiveness of the German economy.