The German economy will narrowly escape the technical recession in the first quarter

The German Ministry of Economy and Energy has published its monthly report on the country’s economy.

The report noted that economic indicators pointed to a visible recovery in the first quarter, with construction and industrial production supporting growth taking advantage of relief from material bottlenecks, falling energy prices and favorable weather conditions.

“Overall, GDP is likely to rise slightly from the previous quarter,” the report said. It was emphasized that the “technical recession”, which is expressed as a contraction of GDP for two consecutive quarters, can be prevented.

In the report, which stated that the German economy got off to a positive start in 2023, it was stated that the mild winter and high levels of natural gas storage contributed to sufficient gas availability in Germany and Europe, and this was reflected in a notable decrease in energy prices.

In the ministry’s report, it was stated that consumer confidence is expected to continue to recover in the coming months with falling energy prices and government incentive packages, stressing that purchasing power losses due to unusually high inflation continued to put pressure on the German economy.

In the ministry report, weak private consumption, worsening conditions in the construction sector, recent problems in financial institutions and geopolitical uncertainties due to the Ukraine-Russia war were cited as risks that will affect the german economy.

The report indicated that although the inflation rate remained at a high level of 7.4 percent in March, it is expected to continue declining in the coming months. Inflation rates were made in the range of 5.4 percent to 6.6 percent for 2023 and between 2.1 percent and 3.5 percent for 2024.

WHAT HAPPENED?

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.

Although the bottlenecks that arose during the Covid-19 epidemic have eased, the country’s economy is negatively affected by the stagnation of demand due to the increase in interest rates, the decrease in confidence in the economy and the decrease in consumer purchasing power. in an environment of unusually high inflation.

After 10 years of good economic growth, Germany entered a recession for the first time since 2009 in 2020, the first year of the Covid-19 outbreak.

The German government expects 0.2 percent growth in the economy this year. Leading German economic institutes predict the country’s economy will grow 0.3 percent this year. (AA)