Germany’s economic fears have persisted for over a year, largely stemming from the sharp escalation of energy prices in 2022.
BNR – According to a recent report, Germany’s Gross Domestic Product (GDP) is projected to contract by 0.6% in 2023.
This downward revision is attributed to the sluggish recovery of both industry and private consumption.
Oliver Holtemöller, Vice President and Head of the Macroeconomics Department at the Halle Institute for Economic Research (IWH) has elaborated on the reason for this revision.
“Industry and private consumption are recovering more slowly than we expected in spring,” he explained.
Energy Price Escalation
Germany’s economic fears have persisted for over a year, largely stemming from the sharp escalation of energy prices in 2022.
The loss of access to affordable LNG sources, particularly from Russia, has left the country’s energy-intensive sectors grappling with challenges.
Furthermore, consumer price inflation has soared past 8%, exerting downward pressure on domestic consumption. Moreover, elevated interest rates have dealt a severe blow to the construction industry.
In this complex economic situation, business sentiment remains subdued, partially due to heightened political uncertainties.
Aggregate indicators show a notable decline in production during Q3 of 2023.
Positive Outlook for Germany’s Economic Situation
However, some positive developments are on the horizon, with rising wages aligning with price hikes.
Additionally, energy costs are exhibiting a downward trajectory, and exporters are passing on a portion of their increased expenses. As a result, experts project a moderated relief of the decline by year-end
Q4 of 2023 is projected to see a short rise in overall growth, with an expected growth of 0.2%.
In 2024, research institutes provide a forecast of 1.3% GDP expansion, a small decline from the previous estimate of 1.5%. For 2025, however, the institutes project an expansion of 1.5%.
The Joint Economic Forecast is a crucial barometer closely monitored by Germany’s economics ministry. It is also compiled by esteemed institutions.
