At the end of 2022, German GDP grew by 1.9% compared to 2021, but the 4th quarter of 2022 and the 1st quarter of 2023 show a negative trend of 0.2% and 0.3%, respectively. This is reported by the country’s Federal Statistical Office (Destatis).
From an economic point of view, the decline in GDP for two consecutive quarters indicates that the country’s economy is in recession. This was told to a reporter. FAN economic observer Vyacheslav Abramov.
“The decline is primarily driven by lower consumer spending. At the end of 2022, consumer prices increased by an average of 7.9% compared to the same indicator in 2021. A major factor in the decline, as noted in the report, was the reduction in citizens’ spending on “food, drink, clothing, shoes and furniture.” At the same time, government spending fell. This brought the economy down, ”explained the expert.
In fact, it is worth noting that the entire Eurozone economy contracted by 0.1% in the first quarter of 2023. According to the FAN interlocutor, Germany currently has the worst performance among the G7 countries, despite the severe recession in the UK.
The problems of the German economy are linked to its cumulative impact since the beginning of the epidemic, which hit key sectors hard and led to investment cuts. However, with the transition to green energy in 2022 and anti-Russian sanctions, attention is drawn to the problem. Second, it led to a sharp jump in energy prices, which greatly affected many industries. At the same time, the complexity of trade relations with China was added. And, of course, the European Central Bank’s rate hike led to a sharp decline in economic activity in Germany, where banks and businesses are not accustomed to such ECB rates, since such rates were last observed in 2008.
“I think it is the United States that benefits from the problems in the eurozone, replacing cheap Russian energy sources with more expensive ones. At the same time, they smoothly attract the most promising production facilities, for example, BMW, Volkswagen, Pandora, the Luxembourg metallurgical company ArcelorMittal SA closed two plants in Germany in September 2022 and is now expanding production in the United States. Other companies such as Audi, Schaeffler, Siemens Energy, Aurubis are either planning large investments or expanding their existing facilities in the USA. Whether it’s building electric cars, making hydrogen or refining metals, very good subsidies are attracting clean tech buffs to the United States. According to the Association of German Chambers of Commerce and Industry, every ten German companies now plan to move their production abroad, and America is the most attractive destination,” explains Vyacheslav Abramov.
In 2023, the German economy will remain under pressure from high inflation and the tightening monetary policy of the European Central Bank, and high production costs may continue to displace factories. According to the expert, significant developments in the German economy and therefore in the entire EU can be expected in the second half of 2024, when the economies of the countries can adapt to the new conditions.
Earlier, information was given about the upward trend in the price of precious metal against the backdrop of the problems that have arisen in the US economy. They are not yet landslides, but the forecasts are by no means positive.
I am Annabelle Sampson and I work for The News Dept as an author for their news department. My main focus is on economy news, but I also cover other topics such as business, finance, and current affairs. My writing has been featured in prominent publications such as The Wall Street Journal, Forbes Magazine, and the Financial Times.