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Exporter’s Struggles: Germany Becomes a Risky Market

After three uncertain years, with an emphasis on the turbulent past year, the first half of this year has brought a small dose of calm to Croatian exporters. Supply chains have more or less stabilized, energy prices have fallen, inflation is gradually calming down… However, there is no relaxation, and it is unlikely to happen soon. Now, the problem of recession in Germany, and more broadly in the eurozone, has come to the forefront.

For many Croatian exporters, Germany is the single largest export market, and the signals coming from it are often contradictory. In a sea of research from various German institutes on the business sentiment of entrepreneurs, optimism and pessimism regularly alternate on a monthly basis, as do individual statistical data on the state of the largest European economy, which sometimes show recovery and sometimes decline, and with them, the expectations of macroeconomists for the second half of the year rise and fall. To at least somewhat clarify what the actual current business situation ‘on the ground’ is, we asked the leaders of companies that are members of the Lider Exporters Club about recent trends in their industry and how they are adapting, what their key business challenges are, and what signals they are receiving from their export markets. Their complete responses will be published daily on the Lider portal (lidermedia.hr) starting this week.

The responses, of course, vary from industry to industry, but generally, the common denominator is the focus of exporting companies on opening new markets. This particularly applies to companies that are predominantly oriented towards the German market, for which high exposure to that market has now become a risk.

– The trends are not good as stagnation in traditional markets, primarily Germany and Italy, is expected to last at least throughout 2024. Therefore, this year is dedicated to finding alternative markets and customers. These are predominantly smaller countries, which will likely adapt more easily to the uncertainties they face. For example, smaller markets like the Scandinavian countries, Austria, and Switzerland still have stable demand, so our focus this year is to reduce the risk of the German market, which accounted for more than 50 percent of our revenue last year – emphasizes Nikola Požgaj, director of Požgaj Group.

In the DZS data on foreign trade exchange in the first quarter of this year, it is still not evident that Germany has become a high-risk zone for Croatian exporters. In that period, it was indeed in the leading position among Croatian export markets, with an achieved export of 712 million euros, which is an increase of 8.2 percent compared to the same period last year. However, it is certain that a change in the structure of exports to that country is coming, as while producers of goods related to the construction sector are lamenting, others, such as Končar, are increasingly working with Germany. The magic term for good business in Germany, as well as in other developed European countries, is ‘green transition’.

You can read the entire article in the new printed and digital edition of Lider.

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