Economic miracle in Europe: Eastern trade grew despite the crisis

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Berlin Without the east of Europe, the situation in Germany would be even worse economically than it already is because of the corona crisis. Because while the German gross domestic product (GDP) in the first quarter with a minus of 2.2 percent has fallen more sharply than ever since the international financial crisis in 2008 in three months, the east trade increased again in the same period by 1.7 percent.

Trade with the East rose surprisingly strongly by another billion euros to a total of 58 billion euros, according to an evaluation of the trade balance sheets by the East Committee of the German economy.

“Although the region’s first quarter figures already show signs of corona, there are also positive effects,” commented Oliver Hermes, chairman of the Eastern Committee, on the surprisingly good figures. He also expects “disastrous figures” in German east trade for April and May, but “the chances of a recovery are improving day by day,” says Hermes, who is also CEO of the Dortmund-based pump manufacturer Wilo, with conviction.

The Eastern European development bank EBRD also sees positive signals for Eastern Europe: With a slump in economic output of minus 4.3 percent in the current year and an increase in gross domestic product by 4.5 percent in 2021, the Eastern European EU countries could get better through the crisis except for Bulgaria come as Western Europe, it says in the forecast published a week ago.

According to experts, one of the causes of a possible rapid rebound in economic growth is likely to be the huge stimulus packages and rescue packages in many Eastern European EU countries. Hungary has mobilized 13.6 percent of the gross domestic product, Czech Republic 12.4 percent and Poland 11.3 percent of GDP for government investments against the slump, as Rafal Benecki of ING Bank calculated.

That is good for the German economy. Because the four so-called Visegrad countries Poland, Slovakia, the Czech Republic and Hungary are together larger foreign trade partners of German companies than the USA or China. The factories of German companies in these countries are now important parts of the parent company’s value chains. However, they also suffer from the situation in Germany: VW has already fired its first employees in Poznan, Poland, according to local press reports.

Poland’s economic engine

In the meantime, Poland has become the most important driver of German exports to the East: the value of German exports to Poland alone rose again in the first three months of this year by a good one billion euros to almost 17.1 billion euros. Poland is the fifth largest trading partner in Germany – ahead of Italy and Great Britain.

The government in Warsaw is now even expecting to get through the corona crisis much better than forecast by the EBRD. Poland’s Prime Minister Jadwiga Emilewicz contradicts the forecast by the Eastern European Development Bank, which predicts a 3.5 percent decline in gross domestic product for the largest Eastern European EU country. The deputy head of government responsible for economic development is convinced that her country can make it through the corona crisis without a recession.

She has “good reasons to believe that we will land on the zero line,” said Emilewicz. Poland has “big buffers” and, thanks to the departure of one million Ukrainian guest workers, enough jobs for Poland that would now become unemployed. Poland was the only EU country to survive the 2008 global financial crisis without a recession.

Hermes from the East Committee sees most of the countries in Central Eastern Europe, such as Germany, in a position of relative strength: the households are largely in order and the infrastructure has been modernized before the corona crisis. “The region is also crisis-tested – it is ahead of Western Europe,” says Hermes. The Eastern European countries had already mastered completely different challenges. And so the head of the association and company predicts: “There are therefore realistic prospects that Central Eastern Europe, in association with Germany, can leave the crisis behind.”

Russia is falling significantly

Russia, however, is becoming a problem child. Not only that the number of corona infected continues to rise sharply and that the giant empire is now in second place behind the USA worldwide. The situation is also extremely difficult economically. The Russian Ministry of Finance, for example, expects real economic growth to decline by a fifth in April in a calculation presented on Wednesday. The Russian economy had not even plunged so badly into the financial crisis when Russian GDP collapsed by 7.5 percent in 2008.

Russia already suffered from the drop in exports in the first quarter: Russian exports to Germany fell by 23.5 percent. The Eastern Committee cites the mild winter, which has led to lower gas and oil requirements, and the simultaneous sharp drop in crude oil prices. The Eastern Committee even sees Eastern Europe as an advantage if German companies move plants from Asia back to Europe as a result of the corona crisis.

More: Eastern Europe is getting through the crisis better.

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