2023-05-25 10:36:03
Germany entered a technical recession in the first quarter of 2023, with a second consecutive decline in its quarterly gross domestic product (GDP). The GDP of the first European economy fell by 0.3% between January and March over one quarter, after a decline of 0.5% between October and December, the Destatis institute indicated on Thursday May 25.
Weighed down by its industry, which is suffering from a fall in demand, against a backdrop of inflation and rising interest rates, Germany is experiencing a new technical recession (ie two quarters of decline in a row). A first since the coronavirus pandemic, which caused a drop in GDP in the first and second quarters of 2020.
Dynamics weighed down by inflation
The German economy seemed to hold up better than expected at the start of the year, with the contained effects of the energy crisis thanks to massive aid, increased use of liquefied gas and the start of a drop in gas prices. But inflation, which remains very high at more than 7%, finally considerably reduced private and public consumption expenditure, which weighed on this dynamic.
The key rate hikes aggressively led by the European Central Bank (ECB) to combat it are beginning to have an effect on activity, by compressing demand. Result: after several months of increase, the production of the manufacturing sector, central to the German economic model, started to fall again in March, falling by 3.4% over one year.
Industrial orders also fell sharply in March, by 10.7%, unheard of since the trough of the pandemic. And exports, essential for this sector, fell sharply to 5.2%.
The IMF more pessimistic than Berlin
Despite this slowdown, the German government still expects a gradual recovery in activity over the course of the year, with a full-year growth of 0.4% in 2023 in the end. Berlin expects the continued fall in inflation in the country and in the euro zone, which should ease the ECB’s monetary policy and revive demand.
But not everyone is so optimistic. The IMF forecast in April that German economic activity would contract by 0.1% this year, before a rebound in growth of 1.1% in 2024.
The German economic situation stands out compared to its European neighbours, where the risk of recession has gradually faded thanks to the drop in energy prices. In Belgium and France, economic activity thus increased by 0.4% and 0.2% respectively in the first quarter of 2023 compared to the previous quarter. Italy, for its part, saw its GDP rise by 0.5%.
#Germany #entered #recession #quarters #decline #GDP