Cece G- Germany LRAS and SRAS Shifts

    Germany has faced a sharp decline in economic growth accompanying the COVID-19 pandemic and the War in Ukraine. Germany is expected to grow by 1.2% in 2022 as opposed to a growth rate of 2.9% in 2021 and these numbers are expected to decrease in the coming years (IMF). Many anticipate that the economy will further plummet due to decreases in funding for education services, a decline in natural gas supplies, and an overall increase in production costs, all together shifting their LRAS curve to the left. 

    The German economy has always remained highly reliant on Russian gas, and the latest squeeze on energy supply, as a result of the war in Ukraine, has largely impacted their economy. The shutoff has reduced GDP by almost 3% next year and raise inflation significantly (World Economic Form). Moreover, A complete halt to Russia gas exports could cost Germany 193 billion euros in economic losses (Eckert). This would hit their glass and iron and steel sectors most, having drastically negative effects on their supply of vehicles and overall, shifting their LRAS curve to the left. 


Germany- Energy Crisis Hardest-Hit Industries

Another possible cause for an economic recession is the decrease in education rates. An educated labor force works to increase aggregate supply as there are more workers to complete high quality tasks. This reduces production costs as extra funds are not needed to help train uneducated individuals. While Germany has always been big on educating their labor force, tighter barriers to university entry in past years have reduced the % of total working-age population with advanced education by nearly 2% (Trading Economics). This could have dire long-term effects on their human capital capabilities, increasing production costs in the coming years. 



Germany- Labor Force With Advanced Education (% of Total)


Sources-

https://tradingeconomics.com/germany/labor-force-with-advanced-education-percent-of-total-wb-data.html#:~:text=Labor%20force%20with%20advanced%20education%20(%25%20of%20total%20working%2Dage,compiled%20from%20officially%20recognized%20sources.

https://www.weforum.org/agenda/2022/08/energy-crisis-germany-europe

https://www.reuters.com/markets/commodities/germanys-gas-crisis-five-charts-2022-06-29/

https://www.imf.org/en/News/Articles/2022/07/21/cf-germany-faces-weaker-growth-amid-energy-concerns#:~:text=Near%2Dterm%20growth%20downgraded&text=After%20growth%20of%202.9%20percent,to%20persist%20even%20into%202023.




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