The German economy contracts in the last quarter of 2022

In the last quarter of 2022, the German economy contracted by 0.4 percent compared to the previous quarter due to the energy crisis and record inflation.

According to final data released by the German Federal Statistical Office (Destatis), the seasonally and calendar adjusted Gross Domestic Product (GDP) in Germany decreased by 0.4 percent in the last quarter of 2022 compared to the previous quarter. .

Destatis had forecast on January 30 that the economy would contract 0.2 percent in the fourth quarter.

The country’s GDP expanded 0.9 percent compared to the same quarter of 2021.

GROWTH IN THE FIRST 3 QUARTERS

The German economy grew 0.8 percent in the first quarter of last year, 0.1 percent in the second quarter and 0.5 percent in the third quarter.

Thus, the German economy grew by 1.9 percent last year, despite its slowdown due to the Ukraine-Russia war, supply problems and the energy crisis.

The main reason why the German economy contracted in the last quarter was high inflation that held back private consumption.

Notably, private consumption spending decreased 1 percent compared to the previous quarter due to high inflation.

“The momentum of the German economy weakened significantly towards the end of the year,” Destatis said.

IT IS ESTIMATED TO ENTER A TECHNICAL RECESSION

On a quarterly basis, there were positive contributions to GDP, especially from the services sector and public spending. A decrease of 1.1 percent was observed in manufacturing investments and 6.2 percent in construction.

Economists expect GDP to fall further in the first quarter of this year as Europe’s largest economy finds itself in a technical recession.

The technical recession is expressed as “two quarters of a GDP contraction”.
Germany experienced its first recession since 2009 in 2020, the first year of the Covid-19 outbreak after 10 years of good economic growth.

In Germany, the government raised its growth expectation, previously announced as minus 0.4 percent, to 0.2 percent on January 25 of this year.

BUDGET DEFICIT 2.6 PERCENT OF GDP

On the other hand, the public budget deficit in Germany, which includes the federal state, the states, the local government and the social security fund, was 101.3 billion euros last year.

Thus, the budget deficit was reduced to 2.6 percent of GDP. The budget deficit had risen to 3.7 percent of GDP in 2021.

According to EU rules, member states’ budget deficits must be less than 3 percent of their GDP and public debts must be less than 60 percent of their GDP.

In 2022, public revenue was recorded at 1 trillion 820.8 billion euros with an increase of 6.4 percent compared to the previous year, and its expenditure was recorded at 1 trillion 922.1 billion euros with an increase of 4 ,1 percent. (AA)