Expert expects painful consequences How the low water level on the Rhine affects the economy
Kiel · The low water levels on the Rhine are not only having a direct impact on inland shipping. Economic experts warn that industrial production could also suffer - especially against the current backdrop of problems.
The economic consequences of low water on the Rhine are painful, according to economist Prof. Stefan Kooths of the Kiel Institute for the World Economy. "Calculations on the consequences of the 2018 low water in the Rhine show that industrial production decreased by about 1 percent when water levels at the Kaub measuring station fell below the critical mark of 78 centimeters for a period of 30 days," Kooths explained.
At its peak, industrial production was down by about 1.5 percent in 2018, Kooths added. Over the year, the low water likely cost about 0.4 percent in economic output. "However, the situation at that time is not equivalent to today," the scientist explained. For example, the "drop height" for German industrial production was much greater back then.
What is much more serious for the economy is the negative impact of the supply bottlenecks: "Until recently, industrial production remained 7 percent below the level that would have been expected in view of incoming orders due to the supply bottlenecks," said the vice president and head of economic development at the Kiel Institute.
"At present, however, the situation is exacerbated by the fact that the obstructions caused by the low water are hitting supply chains that are already very strained," the statement added. In addition, inland shipping is an important means of transporting energy commodities, it added. However, companies are likely to be better prepared for inland waterway failures as a result of the experience gained in 2018, for example by using other types of vessels.
But every additional burdening factor depresses economic momentum. And every additional impediment to production has a price-driving effect, he said, as the discrepancy between demand and supply widens. "From an inflation perspective, therefore, it's not just about the consequences of rising transport costs," Kooths explained.
According to the data, only a small proportion of the goods transported in Germany are carried by inland waterway vessel: in 2017, the number was 6 percent, he said. But for individual commodities such as coal, crude oil and natural gas, coke and petroleum products, and chemical products, inland waterways accounted for 10 to 30 percent of the volume transported. "These goods are at the beginning of many production chains, so failures in their transportation can lead to production disruptions in downstream production stages.”
A shock in a small sector - the share of inland navigation in Germany's gross value added is less than 0.2 percent - could thus have a considerable impact on other sectors.
