German retail sector to contract amid growing economic challenges

By Al Mayadeen English
Source: Agencies
12 May 2023 16:07

The German sector, which in 2021 proved to comprise 17% of Germany's GDP, is set to contract as more than 9,000 businesses are expected to shut down with Berlin facing a more difficult situation.

In this Friday, June 26, 2020 photo the 'East Side Mall' shopping center is pictured in Berlin, Germany. (AP)

Handlesverband Deutschland, the national retail association of Germany, announced that Germany's retail sector will contract as approximately 9,000 shops and small businesses are expected to shut down throughout 2023.

It is worth noting that figures from 2021 underscore that Germany's retail sector accounts for 17% of its Gross Domestic Product (GDP).

In a statement, the head of Handlesverband Deutschland, Alexander von Preen, said "In view of the figures from recent years, all the alarm bells must be ringing in all inner cities and in politics. Because without successful retail, the city centers have hardly any prospects for the future."

Moreover, the expert noted that “If trade dies, the city dies. Trade is not only the supplier of the population, but is also characterized by its diverse social commitment on site and is also the caretaker of the cultural area of the inner city. These achievements are in danger."

In Berlin, the situation has been described as being far worse by the head of the Handlesverband Berlin, Nils Busch-Petersen, who said, "The situation is complicated because the retail industry is still suffering, beginning with the (February 2022) war in Ukraine. Even all the other branches have problems because the behavior of the customer changed totally."

Busch-Petersen noted that about 2,500 - 3,000 businesses have closed, before he explained that the government has a misconception regarding customer behavior. “They [government] are looking very very sharply at their budgets so they select out, for example, organic foods, regional products which some politicians think is deeply ingrained in the customer,” but customers “are changing everything, so we think we will lose more and more retailers.”

War in Ukraine cost Germany $106.7bln in 2022

The President of the German Institute for Economic Research (DIW Berlin) Marcel Fratzscher said, in February of this year, that since the start of the war in Ukraine, Germany has lost over $106.7 billion.

In an interview, Fratzscher told the Rheinische Post that "the Ukraine war and the associated explosion in energy prices cost Germany almost 2.5 percent, or 100 billion euros in economic output in 2022," adding that costs will continue to accumulate in the coming years.

Germany, according to Fratzscher, has been more severely impacted by the economic crisis because it is "extremely dependent on exports and global supply chains."

Berlin also has a significant share of energy-intensive industry that depends on the increasing energy costs.