Customs restrictions significantly impacted Germany's economic growth.
Following the escalation of border controls in Germany, Allianz Trade has issued a warning about potential economic repercussions. The prolonged wait times at borders are instigating a sequence of events. The predicted damage to the country's GDP could surpass 10 billion euros in double digits.
Temporary border checks in Germany might intensify economic woes, as per an evaluation by Allianz Trade. "The extended border wait times might escalate transport and merchandise costs for imports by approximately 1.7%, subsequently reducing both overall trade volume and competitiveness, which is currently on the low side for German manufacturers," explained Senior Economist Jasmin Groeschl.
These controls are causing a ripple effect: "Trade could experience annual losses of up to 1.1 billion euros." This could potentially intensify recession risks and result in losses to the country's GDP of up to 11.5 billion euros. Germany has extended the ongoing border controls in its eastern and southern territories to all land borders. These controls aim to mitigate unwanted immigration and crime. Federal Interior Minister Nancy Faeser had promised that ordinary commuters wouldn't encounter significant traffic disruptions.
Under regular situations, an average border crossing within the Schengen zone takes approximately 3.34 minutes, as mentioned by Allianz Trade. With the controls, anticipate a scenario similar to that at Schengen's external borders, where a border crossing with random inspections could prolong travel time on a transit route by approximately 20 minutes.
"As a result of the border delays, we foresee increasing costs and supply chain disruptions, as well as a potential decrease in imports to Germany by approximately 8%," said Groeschl. Given that about two-thirds of German imports are conducted via land borders, this would equate to annual decreases of up to 1.1 billion euros. "The loss of these imports might result in certain end products being discontinued, or businesses having to maintain more and more pricey inventory due to the restrained just-in-time production in the manufacturing sector."
Cost increase across various sectors
As per sectors, the food industry could encounter an increase in trade costs of 2.6% and import losses of 62 million euros. For trade services, the estimated cost increase is 2.4%, accompanied by import losses of 55 million euros, and for transport services, the cost increase amounts to 1.8%, causing import losses of 51 million euros.
While the cost increase for mechanical engineering and the chemical and pharmaceutical sector is lower at 1.2 and 2.3%, the substantial reduction in imports of 147 million and 142.1 million euros, respectively, is noteworthy due to their high trade volumes. The education and leisure sector is also significantly impacted. Due to limitations in person-to-person traffic and expected congestion, fewer leisure services related to border crossings, such as day trips or weekend trips, will be explored.
The Commission has expressed concerns about the prolonged border controls, acknowledging their potential impact on various sectors. As Groeschl further explained, these controls could lead to a significant increase in costs and supply chain disruptions for the food industry, resulting in import losses of 62 million euros.
