Low water levels in Rhine river threat to German economic recovery – analysts

Low water levels in the Rhine river as a consequence of ongoing droughts in various German regions threaten to hurt the country's economy, economists at Deutsche Bank Research warned in an article published by Spiegel. The Rhine is Germany’s most important shipping route for raw materials, and low water levels could mean that large container ships have to significantly reduce their cargo – in some cases by half – to continue to be able to navigate the waters. “If the levels over the course of the year turn out to be similarly low as in 2018 or 2022, this would have a negative impact on the economic recovery,” Marc Schattenberg of Deutsche Bank Research told Spiegel. “That would be a headwind for the expected recovery after the technical recession.” Production can come to a standstill if vessels can’t navigate inland waterways, and costs also increase as shallow waters lead to surcharges on freight rates, with more vessels needed to transport goods, Spiegel reports. In turn, this could slow down the expected easing of inflation in the country, Schattenberg said.

Shallower water levels in Germany’s largest river have occurred several times in recent years and are influenced by changing precipitation patterns linked to climate change. Economists from the Kiel Institute for the World Economy analysed the impact of low water levels in the river Rhine on Germany’s economic output using historical data. They found that in a month with 30 days of low water, industrial production in Germany declined by about 1 percent. “Our analysis highlights the importance of extreme weather events for business cycle analysis and contributes to gauging the costs of extreme weather events in advanced economies,” the economists write in the introduction of their paper.

Germany experienced low water levels in the Rhine river after a prolonged droughts in 2018 and 2022. This disrupted fuel and chemical supplies on the vital European trade route, hitting Germany’s economic output and raising questions about how climate change will hit Europe’s transport infrastructure. The pressure to adapt to the already inevitable consequences of climate change has been rising across the globe in past years. Climate in Europe is warming faster than anywhere else in the world, and droughts are having an impact in 2023 across the continent again.