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Low water in the Rhine increases the risk of recession

2022-08-09T10:08:41.350Z

Because of the low water level, freight traffic is stagnating on Germany's most important waterway. Economists warn that the gross domestic product could therefore be lower.



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Sandbank in Duisburg: The low water level is becoming a problem for the economy

Photo: IMAGO/Jochen Tack

High energy prices and a lack of goods are already causing problems for the German economy - now the low water could exacerbate the situation.

According to economists, the low water levels on the Rhine – the most important German waterway – make a recession of the already weakening economy even more likely.

"In any case, we expect that the German economy will fall into a slight recession from the third quarter and that growth in 2022 should only be 1.2 percent," said Deutsche Bank's Germany chief economist, Stefan Schneider, of the Reuters news agency.

"If the water levels continue to fall, growth could also drop to just under one percent," Schneider warned.

Due to the tense energy situation, the limited coal transport for the power plants along the Rhine is probably the biggest problem this time.

Higher transport costs are likely to create additional upward pressure on the producer prices of the goods concerned.

The Landesbank Baden-Württemberg (LBBW) sees the risk in a similar way: "You might not be wrong if you assume at the moment that the gross domestic product will be burdened by a quarter to half a percentage point as a result of the low water," said LBBW economist Jens- Oliver Niklasch.

The situation is more dangerous this time than during the low water of 2018, "because the supply situation is already tense and, above all, the coal-fired power plants, which are of outstanding importance for electricity generation, are likely to be more affected".

The Kiel Institute for the World Economy (IfW) also sees further adversity looming for German industry.

"Since mid-July, the water levels in the Rhine have been so low that they have had a noticeable impact on freight traffic," said IfW economist Nils Jannsen.

"In the past, industrial production has been pushed down by around one percent when water levels have fallen below a critical mark for a period of 30 days." In 2018, when shipping on the Rhine was last hampered by low water for a long period of time, is industrial production was pushed down by around 1.5 percent at its peak.

The Rhine is an important shipping route for commodities such as grain, chemicals, minerals, coal and oil products such as heating oil.

Companies keep a close eye on water levels.

The water level on the Rhine has recently fallen further due to the hot summer weather and the lack of rainfall.

The water level at the Kaub narrows near Koblenz is particularly low: the reference water level is only 52 centimeters.

But ships need about 1.5 meters to be able to drive fully loaded.

"We continue to sail, but can only load about 25 to 35 percent of the ship's capacity," said recently the director of the shipping cooperative DTG, Roberto Spranzi, which operates around 100 ships on the Rhine.

»This means that customers often need three ships to transport their cargo – instead of just one.«

mic/Reuters

Source: spiegel

All business articles on 2022-08-09

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