When it released its full-year 2022 economic growth figure earlier this month, Destatis said it expected the economy to stagnate in the fourth quarter. Compared to the third quarter, however, the economy of the Netherlands’ major trading partner contracted by 0.2%. Compared to the same period of the previous year, there was a growth of 1.1%.
Fears of recession
A recession in Germany is therefore possible again, if the economy also shows a contraction in the first quarter. Last week, the German government presented a new forecast for 2023, counting on little economic growth this year. Last fall, the government was still counting on a contraction of the German economy in 2023.
Besides Germany, Sweden also showed an unexpected contraction in the last quarter of 2022. In addition, inflation in Spain unexpectedly rose to 5.8% in January, while it was expected to fall to 5%. The economic outlook for Europe therefore remains uncertain.
Central bank
The European Central Bank has expressed its determination to reduce inflation in the euro area. The ECB is expected to raise interest rates again by half a percentage point on Thursday to counter the rise in prices. However, higher borrowing costs are also holding back the economy and the full impact of previous interest rate hikes is yet to come.