At the end of 2023, Germany’s GDP decreased by 0.3%
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At the end of 2023, Germany’s GDP decreased by 0.3% – this is the preliminary estimate given by the country’s Federal Bureau of Statistics (Destatis). In 2022, on the contrary, there was economic growth – by 1.8%. Despite the decline in GDP, a technical recession (a decline in the indicator for two quarters in a row) has not yet been recorded: in the fourth quarter, the German economy allegedly contracted by 0.3% compared to the third, and in the third it showed zero growth (the previous estimate suggested a decline of 0.1% ). Destatis will publish more accurate data at the end of February.
The first contraction of the German economy since Covid 2020 is largely due to the ECB’s tight monetary policy. The fact that the effect of the rate hike cycle will be exactly this was indicated by the values of leading indicators. Thus, from May to October, the index of investor confidence in the German economy, calculated by the Center for European Economic Research (ZEW), was in the negative zone. The Manufacturing PMI has been below the 50-point mark that separates business expansion from contraction all year.
As follows from the data published yesterday, the volume of industrial production in Germany at the end of 2023 decreased by 2% compared to the previous year. Growth was recorded in the production of automobiles and transport equipment, while decline was observed in industries more sensitive to fluctuations in energy prices, including the chemical and metallurgical industries.
In addition to unfavorable financial conditions, economic growth was constrained by weak domestic and external demand, Destatis notes. The muted recovery of the global economy was reflected in German foreign trade statistics: imports decreased by 3%, exports by 1.8%. The weakness of global demand explains the worsening forecasts for GDP growth in Germany and the Bundesbank: the current forecast assumes economic growth of 0.4% in 2024 and 1.2% in 2025, the previous one – an increase of 1.2% and 1.3%, respectively. .
It is expected that economic growth will be supported this year by a stable labor market and weakening inflation. According to forecasts, thanks to a strict monetary policy, it will slow down faster than previously expected: in 2024, inflation could reach 2.7%, in 2025 – 2.5%.
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