Germany is on way for its first two-year recession since the early 2000s after its economy shrank in 2023 due to impact of high energy costs and weak industrial demand.
The German national statistics office said “various crises” affecting the economy had contributed to a 0.3% decline in gross domestic product (GDP) in 2023, compared with the previous year, due to high interest rates and high living costs.
“Despite latest price declines, they remained high at all stages in the economic process and casting dampening effect on economic growth,” said Dr Ruth Brand, the president of the statistics office, at a media briefing in Berlin on Monday.
“The German economy did not sustain its recovery from the sharp economic slump witnessed in the pandemic year of 2020.”
Germany’s economy was 0.7% higher in 2023 than in 2019, the year before the pandemic started. However, analysts said Europe’s biggest economy was on way for another year of stagnant growth in 2024 at best, with a higher risk of a second consecutive year of negative output.
Carsten Brzeski, the global head of macro research at the Dutch bank ING, said: “There is no imminent rebound in sight and the economy appears poised to experience the first two-year recession since the early 2000s.
“We expect the current state of stagnation and mild recession to continue. In fact, the risk that 2024 will be another year of recession is high.”
Following adjustment for calendar effects, the decline in economic performance in 2023 reported to 0.1%, the statistics office said. It added that in the final quarter of last year the German economy shrank by 0.3%, compared with the third three months, when output had stagnated.
Germany’s core industrial base, excluding construction, decline by 2% over the course of the year, as high energy costs and shrinking demand at home and from abroad putting pressure on factory output.
Due to the impact of high energy bills and borrowing costs on consumers, household consumption fell 0.8% on the previous year, while government expenditure fell 1.7%.
