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German Union of Engineers announces shortage of materials and cuts growth forecast for 2022

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The German Mechanical Engineering Association (VDMA) has announced a severe shortage of materials, caused, among other things, by events in Ukraine and restrictive measures in China to reduce the spread of coronavirus. For this reason, VDMA has been forced to reduce its production growth forecast for 2022 for the second time.

“We will probably have to adjust our annual forecast again,” VDMA chief Karl Heusgen said in an interview with Welt am Sonntag on Saturday. He added that the situation had deteriorated considerably in recent years. “At the beginning of the year, we expected a 7% increase for 2022, which then had to be adjusted to 4% in March. But even this cannot be sustained,” the VDMA chief said.

Heusgen justified the move by the existence of a high-risk situation, both due to events in Ukraine and the quarantine measures in force in China, as well as high inflation and disruption of the supply chain. “Most of all, we are shocked by the lack of materials,” said the head of the German Carmakers’ Union. “Companies do not have semiconductors and a number of other electronic components, and the situation of metals and plastics is getting worse again,” he said.

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However, Heusgen noted that China’s restrictive measures had a much stronger impact on the industry than Russia’s special military operation in Ukraine. The factories, he said, are not getting the raw materials they need from Asia, and the shortage of materials and containers stuck there will be felt everywhere.

At the same time, the manufacturing industry is also very concerned about the continuing threat of disrupting Russia’s gas supply. “The gas embargo will put even more pressure on supply chains, so many parts will suddenly cease to be available. Then our factories will also shut down,” Heusgen said, adding that at the same time, this could also affect demand.

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The previous German government, on the background of events in Ukraine, adjusted the forecast for the recovery of the country’s economy in 2022 downwards. According to new estimates, Germany’s GDP will grow by only 2.2% this year. In January, the German authorities assumed that in 2022 GDP growth will reach 3.6%. According to the spring forecast, in 2023 the country’s GDP will increase by 2.5%.

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