Germany’s risk outlook wavers amid lower growth

Matthew Turner
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Germany still the strongman of Europe - but its risk score is weakening.

Germany’s economic outlook indicator fell this week, as news filtered through of worsening European growth figures.

Germany’s Q4 GDP decline of 0.6% GDP was worse than the consensus forecast of 0.5% but was in line with the European average growth data. The latest GDP figures, which came from the ECB and German economic research institutes, prompted ECR analysts to downgrade the country’s economic outlook indicator by 0.1 points to 6.7 in February 2013.

However, the downward shift in Germany’s ECR score was not dramatic enough to off-set its stable position in the ECR rankings. The sovereign retains a comfortable position in tier one – ECR’s safest category – and with a global rank of 12 it sits alongside Austria, the Netherlands and Denmark.


Countries in ECR tier one score between 80 and 100, and can be equated to a credit rating of AA and above. Meanwhile, Germany’s economic risk score of 71.8 is the fifth strongest in the eurozone and sixth in the EU: only Sweden, Luxembourg, Finland, Netherlands and Austria now boast higher economic assessment scores.

The German economy has bulked regional growth trends since the on-set of the financial crisis in 2008, but a slowdown in global demand for German exports has left Europe’s largest economy wavering in 2012. Indeed, the country’s economic assessment deteriorated by 0.8 points in 2012 after a deterioration in the manufacturing and services PMIs (October) for the sovereign.

Christian Richter, principal lecturer in economics and finance at the University of East London and a member of ECR’s expert panel, says: “The outlook for Germany is negative for at least the next quarter on the basis that the car industry -- such as Volkswagen, but also Opel -- faces lower demand especially in Europe, due to the recession. German exports are expected to fall. The German car industry really represents the industrial sector as a whole and business confidence is shrinking.”

This article was originally published by Euromoney Country Risk. To find out more: register for a free trial at Euromoney Country Risk.