Germany could enter a technical recession
The European country could enter a technical recession in the coming months, affected by inflation and the energy crisis
Inflation and the energy crisis slowed down the German economy in the fourth quarter of 2022, which could lead to a recession in the first months of the new year, according to data from the Federal Statistical Office released on Monday.
The gross domestic product (GDP) contracted 0.2 % in the last three months of 2022 compared to the previous quarter, mainly due to the drop in citizen consumption. Initially, the Wiesbaden-based authority forecast stagnant GDP from October to December.
According to experts, economic output is likely to contract again in the first quarter of this year. If GDP falls for two quarters in a row, economists talk about a technical recession. “High inflation rates have driven the German economy into a winter recession,” said Ifo’s economics officer Timo Wollmershäuser.
Driven by high energy and food prices, inflation reached an annual average of 7.9 percent in 2022, the highest level since the founding of the Federal Republic.
Thomas Gitzel, chief economist at VP Bank, assumes that there will not be a serious collapse of the German economy. “However, there will be a slight recession, and German GDP is also likely to fall slightly again in the current quarter.”
At the end of 2022, consumer spending, which had supported the German economy following the end of most coronavirus restrictions, fell in price, seasonal and calendar-adjusted terms compared to the previous quarter.
“Consumers are not immune to the erosion of their purchasing power due to record inflation,” explained Jörg Krämer, Commerzbank’s chief economist.
Deutsche Bank’s chief economist for Germany, Stefan Schneider, also expects Europe’s largest economy to contract in the first quarter of 2023. “However, it will only really be a technical recession. That is, two consecutive quarters of GDP contraction, and not a decline in growth as was feared until recently.”
Source: dpa
(Reference image source: Norbert Braun, Unsplash)
Visit our news channel on Google News and follow us to get accurate, interesting information and stay up to date with everything. You can also see our daily content on Twitter and Instagram
