rhine river shipping

Germany’s Dried-Up Rivers Cut Growth But the Rebound Is Coming

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January 23, 2019

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By Paul Gordon (Bloomberg) — Sinking water levels on Germany’s industrial rivers probably shaved at least 0.7 percentage point off economic growth last year, adding to a series of shocks that almost tipped the nation into a recession.

JPMorgan economist Greg Fuzesi estimated the impact of the high temperatures and low rainfall that dried up waterways — most notably the Rhine — hindering transport and curbing production processes that use river water for cooling.

“Ships cannot carry a full load when the water level drops too far as the ship may run aground. If the water level falls from 250 centimeters to 75 centimeters, each ship can only carry a quarter of the normal load in tons. If the water level falls below 40 centimeters, shipping is generally considered too dangerous, and even before this level the cost of shipping rises sharply.”

Read More: Europe’s Most Important River Is Running Dry as Glaciers Shrink

Germany was also hit by temporary shocks in the auto and pharmaceutical industries, contributing to the economy shrinking in the third quarter and — according to early estimates — barely growing in the fourth quarter. That has added to wider slowdown concerns in the euro area.

Impact of one-offs on German economy

Fuzesi notes that not all of Germany’s weakness can be explained by such one-off events, and the cause of the rest is a “puzzle.” The good news though is that water levels are rising again, helping growth rebound. He estimates that the “Rhine impact” will add 0.55 percentage point to GDP this quarter.

© 2019 Bloomberg L.P


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