Germany's eastern trade starts recovery from pandemic-linked damage

FILE PHOTO: A truck driver gets a temperature check, while a Polish police officer watches, at the German-Polish border, as the two countries try to contain the spread of coronavirus disease (COVID-19), in Frankfurt/Oder, Germany March 17, 2020. REUTERS/Axel Schmidt

BERLIN (Reuters) - German trade with its eastern neighbours began recovering in July after the devastation the coronavirus pandemic caused to ties between the highly integrated economies of central Europe, but only in the case of Poland was there a return to growth.

According to German Eastern Business Association figures seen by Reuters, both exports to and imports from Poland grew 1% in July compared to the previous year, though month-on-month improvements could also be seen in trade with Czechia and Hungary.

The economies of the four “Visegrad” countries Poland, Hungary, Czechia and Slovakia are deeply integrated with Germany’s giant manufacturers, many of whom have taken advantage of frictionless intra-EU trade to establish manufacturers there.

The depth of that integration last year saw Poland replace Britain, which has now left the European Union, as the fifth-largest trading partner of Europe’s largest economy.

But lockdown measures in all five countries from March onwards slowed passenger travel to a trickle, with knock-on effects to transport and trade, while collapsing demand made itself felt all the way down the supply chain.

In year-on-year terms, trade with Czechia, Germany’s second-largest trade partner in the region, was down 9.1% and it was down 3% with Hungary. Trade with Russia, with far more distant ties to the German economy, collapsed, falling 28% compared to the previous year.

In month-on-month terms, trade had begun recovering, the Association said, with trade to the entire region rising 8.8% between June and July, in an indication that the worst effects of the coronavirus and lockdown may have passed.

But Oliver Hermes, the association’s president, warned that a second wave could see renewed setbacks.

“A similarly drastic lockdown with renewed border closings, problems for commuters and the interruption of supply chains must absolutely be avoided,” he said.

Reporting by Andreas Rinke, writing by Thomas Escritt; Editing by Bernadette Baum