Germany, the largest European economic powerhouse, is going through a very harsh winter. With the sudden drop of gas supply from Russia, the energy price soared and consequent inflation is ever worsening. According to the field report by The Dong-A-Il-bo, major German companies such as BASF are at risk of suspending production, with the declined plant activation rate from the energy crisis doubled with drought. The International Monetary Fund’s economic growth outlook for Germany in 2023 is 0.8 percent. There is a forecast that Germany will face the worst economic crisis since 2008 financial crisis.
The crisis in Germany started from the energy shortage issue, which was triggered by the war between Russia and Ukraine. Germany whose gas dependency on Russia stood at 55 percent was hit hard by the international community’s Russian sanction and Russia’s retaliative suspension of gas supply. Germany’s growth strategy, which resorted to the inexpensive Russian energy, came back to haunt the nation.
The German economic structure boasting high export percentage is wobbling from the fluctuating external situations. German companies are suffering from the Covid-19 lockdown of the biggest exporter China and export decline from the sluggish growth. The passage leading to Chinese export is narrowing down further from reasons including the clash between the U.S. and China, close ties between Russia and China against the U.S., and the moves by the international community to keep in check the aforementioned ties. The intensifying New Cold War is pushing the German economy to the brink.
South Korea is also dependent on overseas for energy and export. South Korea is one of the countries exposed to the highest geopolitical crisis amid the New Cold War including the conflict between the U.S. and China. There is possible economic retaliation from China owing to reasons of THADD and others but Korea’s semiconductor export to China accounts for 60 percent (Hong Kong inclusive) of export and Korea’s China dependency for the battery parts in the electric vehicle has increased further. If the repercussion of conflict between the U.S. and China affects Korea, the country could any minute be in the shoes of Germany.
The global nation-centrism and energy protection moves encouraged by the New Cold War is getting fiercer every day. South Korea would find it difficult to stay away from the impact as the world’s top fifth energy importer and highly export dependent. Amid the continued wave of inflation, now the valley of economic recession looks quite deep. The impact of complex crisis is expected to be strong and will possibly last for long.
It is becoming impossible to respond to the risks from the New Cold War without reducing excessive dependency over specific countries. The Korean government shall speed up in diversifying supply networks and export markets. The country needs to monitor energy and food security level and meticulously look after the supply of key strategic supplies. South Korea should learn from Germany and devise long-term diversified strategies to respond to quickly changing external environments in a flexible manner.