(a survey among 9,000 German firms) and the statistics of incoming orders for the manufacturing sector at the beginning of September revealed a continuation of the economic downturn in Germany that cannot be ignored anymore.
The business climate dropped to 94.3 points – its lowest value since November 2012.
Incoming orders (see Figure 2 below) point to a severe weakness of investment.
These factors, amongst others, further strengthen the now widespread expectation that the Federal Statistics Office of Germany (Statistisches Bundesamt) will announce negative GDP growth for the third quarter of 2019.
Since this would mark the second consecutive quarterly contraction, it means that the German economy would be officially in a technical recession.
The recession in Germany comes at a time at which the only readily available instrument in the Monetary Union (EMU) to fight recessions, namely monetary policy, is not available anymore.
Moreover, German policymakers, the media, and professional economists have imprudently ignored the downturn, so that a discussion about appropriate countermeasures on the fiscal side remained silenced and valuable time was lost.
The repercussions for several fragile member states of the EMU, such as Italy and France, could turn out to be ominous.”
During Macri’s first year, economic recovery was slow. Unemployment and inflation remained high and growth did not come as expected. Kirchner’s Careful Pricing price-control program, which benefited small and medium-sized enterprises, was kept with a revision of its included products. The government began several public-works projects to stimulate the economy and help the construction sector. Political intervention in the INDEC figures ended, and the International Monetary Fund (IMF) declared in November 2016 that Argentine statistics were again in accordance with international standards. The Organisation for Economic Co-operation and Development (OECD) estimated that Argentina would emerge from recession in 2017 or 2018, and lowered its country risk classification from seven points to six.
The economy worsened in 2018: inflation remained high, due in part to a trade deficit. The production of soy, the country’s main export, had been reduced by a drought which was among the worst natural disasters in the world that year. The US Federal Reserve increased its interest rates, which raised the price of the US dollar against other currencies. The Central Bank of Argentina increased the interest rate to 60 percent, but could not hold off inflation.
Macri announced on 8 May that Argentina would seek a loan from the IMF.
Macri replaced him with Luis Caputo, and merged the ministries of treasury and finances into a single ministry led by Nicolás Dujovne. The US–Turkey diplomatic conflict caused a new increase on the US dollar. As a result of the crisis, the tariffs on soy exports were restored. Caputo resigned, and Guido Sandleris replaced him as president of the Central Bank. The IMF expanded the loan with an extra 7 billion, on the condition that the Central Bank would only adjust the price of the peso against the US dollar under certain conditions. The 2019 budget reduced some expenditures and increased some taxes, in order to completely avoid a deficit.