Germany’s supply chain reliance threatens post-pandemic restart

German industry’s dependence on international supply chains could hold back the economy’s return to business as usual when the coronavirus pandemic eases.

A report released by the Munich-based Ifo Institute on Thursday puts the tally of production in Germany that relies on global suppliers at 17%—a much bigger share than in other countries.

While the authors said production networks appear to be well-diversified, they are primarily concentrated in the European Union. With countries from Italy to Poland taking different approaches to easing lockdowns, that geographical focus could have a knock-on effect on how quickly output restarts.

“Free movement of goods within Europe is necessary for the economic restart after the corona pandemic,” Ifo said. “For Germany, the European production network plays a preeminent role.”

The 32-page report predicts that the pandemic will force global companies to hold higher level of stock and further diversify their suppliers.