The German economy is expected to stagnate this year

The Association of German Chambers of Industry and Commerce (DIHK) expects zero growth and high inflation in the German economy this year.

DIHK published the results of its survey on the outlook for the country’s economy with 21,000 German companies from all sectors.

Consequently, 34 percent of the surveyed German companies assessed their employment situation as good, while 51 percent reported that their work was satisfactory. 15 percent of companies also rated their business as bad.

Nearly a quarter of the companies surveyed said they expect their business situation to worsen in the next 12 months.

65 percent of companies surveyed ranked energy and commodity prices as the biggest business risk, up from 72 percent earlier this year.

The DIHK survey identified labor costs as the second biggest risk due to a shortage of skilled workers and high inflation. 53 percent of surveyed companies cited labor costs as a business risk.

DIHK does not expect GDP growth in Germany this year as the economic outlook remains bleak for the next 12 months.

According to DIHK, the inflation rate will be 6 percent this year, well above the 2 percent target of the European Central Bank (ECB).

THE HORIZONTAL TREND CONTINUES

DIHK board member Ilja Nothnagel, at the report launch in Berlin, asserted that the “horizontal trend” that has caused concern in the German economy since the beginning of this year has continued, saying: “There is still no basis wide. bullish sign”.

Noting that despite high energy prices, rising interest rates and the war in Ukraine, German companies have shown that they are “remarkably resilient,” Nothnagel said: “However, the economic outlook for “Next 12 months remain bleak overall, demand side orders have declined significantly. DIHK still expects zero growth in the German economy this year.”

Emphasis on LACK OF SKILLED WORKERS

Noting that the economic situation for companies in Germany has not gained momentum despite slight improvements, Nothnagel said: “Unfortunately, the global economy and domestic demand cannot provide any impetus at the moment. “When it comes to business risks, in addition to the economic risks for companies, the long-term structural challenges for the German economy continue to come to light.”

Noting that the lack of skilled workers is currently the second biggest business risk for German companies, Nothnagel said: “Given the aging society in Germany, the shortage of skilled workers will continue to be one of the main structural challenges for companies in the future. .”

Nothnagel also stated that labor migration to Germany must be increased in order to reduce shortages on the labor market.

A GROWTH OF 0.4 PERCENT IS EXPECTED

According to main data from the German Federal Statistical Office (Destatis), the German economy did not grow in the first quarter of this year due to unusually high inflation and rising interest rates that suppressed consumer spending. Thus, after zero growth in the first quarter, the German economy did not enter “closely” into technical recession, which is expressed as “two quarters of GDP contraction”.

The German economy contracted 0.5 percent in the last quarter of last year.

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 rise in interest rates, the decrease in confidence in the economy and the decrease in consumer purchasing power. in an environment of unusually high inflation.

The German government expects 0.4 percent growth in the economy this year. Leading German economic institutes predict the country’s economy will grow 0.3 percent this year.

Destatis will release its final first quarter GDP data on May 25. (AA)