A surge in domestic demands and Iran’s appetite for German goods are likely to fuel further growth in Germany’s economy.
After the removal of international sanctions against the Iran, Germany’s exports of equipment and machineries to the Islamic Republic has jumped.
According to Germany’s Federal Statistics Office, the country’s exports have surged by 15% during the first 6 months of this year and have touched 1.13 billion euros ($1.3 billion).
“There is a huge demand in Iran for plant and equipment”, said Michael Tockuss, who heads the German-Iranian Chamber of Commerce. He went on to add that electrical engineering and chemical products are also doing well.
“And there is growing demand for technology from the renewable energy sector, mainly wind power stations,” said Tockuss.
However, the reluctance of banks to finance bigger deals between the two countries is acting as an impediment.
According to Tockuss, Germany’s exports to Iran could be in the range of 25%-30% for the year 2016-2017.
“The sanctions against Iran were built up over several years and it now will take some years to reverse them and establish new business ties,” he said.
However, Germany’s exports to Russia have fallen by 3.5% to 10.1 billion euros in the January to June period after having plunged by 25% to 21 billion euros in 2015.
This dip can be explained by the imposition of international sanctions against Russia over its Ukraine conflict.
Clouded outlook with other trading partners
Although its exports to Iran have surged ahead, exports to France and the U.S., its two most important export market, have fallen by 2% to 52.1 billion euros and by 4$ to 53.4 billion euros, respectively, during the first six months of this year.
With Brexit putting the brakes of Britain’s economy, Germany’s exports to Britain stagnated in the first half of the year to around 44.8 billion euros.
As for exports to emerging economies, its exports to China rose by just 1% to 36.3 billion euros, while its exports to Brazil fell by 18% to 4.4 billion euros. Its exports to South Africa was also down by 11% to 4.4 billion euros.
As per the head of Germany’s BGA trade association, the country’s export is expected to grow at a reduced pace due to increased external risks, including Brexit and uncertainties surrounding of elections in France and the U.S.
Last year, Germany’s exports were mostly driven by a strong demand from other EU countries. This had resulted in a net foreign trade contribution of 0.2% point, which in turn contributed to a 1.7% growth in its overall exports.
For 2016, Germany expects the same trend to continue: backed by a soaring domestic demand, its economy is set to follow last year’s growth rate. Contribution from its exports to the economy however is expected to be at much lower levels.
($1 = 0.8857 euros)
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