The country recorded a drop in economic activity for two consecutive quarters for the first time since the coronavirus pandemic
A Germany entered a technical recession in the first quarter of 2023, after the second consecutive contraction of the Gross Domestic Product (GDP). The country faces a scenario of falling demand in industry, inflation and high interest rates. The GDP of Europe’s largest economy fell by 0.3% between January and March compared to the previous three months. In the fourth quarter of 2022, Germany contracted by 0.5%, according to seasonally adjusted data released by the Destatis institute. On an annual basis, the German GDP contracted 0.5% in the first three months of the year. As a result, Germany entered a technical recession, which is defined as the decline in activity for two consecutive quarters.
This is the first time this has happened in the country since the coronavirus pandemic, which caused GDP to fall in the first and second quarters of 2020. German industry, which for a long time was dependent on Russian gas, was badly affected last year after Moscow, as a result of Western sanctions for its invasion of Ukraine, cut supplies and prices soared. Despite the backdrop, the German economy seemed to hold up better than expected, thanks to huge public aid, increased use of liquefied gas and a drop in gas prices earlier in the year. The industry has also benefited from China’s reopening after the pandemic.
Several economic indicators for the month of March illustrate the situation, with emphasis on industrial production, central to the German economic model, which fell by 3.4% compared to February. Industrial orders also fell sharply in March, down 10.7% compared to the previous month, an unprecedented result since the worst moment of the pandemic. Exports, essential for this sector, fell by 5.2%. And all this in a scenario of a slowdown in domestic consumption, due to inflation, which remains very high by German standards, above 7%. The country’s trade allies imported less German-made products due to “geopolitical turmoil, high inflation and loss of purchasing power”, said the economic institute DIHK.
Despite the results, the German government projects a progressive recovery of activity during the year and a growth of 0.4% for 2023. “The economy faced a weakness in winter (northern hemisphere). But we continue to expect a considerable improvement throughout the year”, said the Ministry of Economy. But not everyone is so optimistic. The IMF forecast in April that German economic activity will contract by 0.1% this year, before a 1.1% recovery in 2024.
*With information from the AFP agency
Source: Jovempan
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