The fact that there is a “mild recession” can be explained by “weak consumption, due to high inflation, high energy prices and the sector is not doing well,” says Brzeski. Despite this being a mild recession, he finds the development worrying. “If there is no economic growth, pension promises, for example, are difficult to keep.”
“Stagnation is the baseline scenario for the next few years”
The picture isn’t rosy for the next few years either, Brzeski notes. ‘It’s a nice illustration of what Germany can expect in the coming years, namely a stagnant economy. We have so many structural reforms and challenges ahead of us. Add to that the European Central Bank’s higher interest rates, the slow recovery in China and a possible recession in the United States.’
The Netherlands is also facing an economic downturn
Partly because of all these circumstances, ING’s chief German economist expects the country to remain in a “kind of flirtation with a recession or stagnation” over the next few years. Due to the lack of other strong economies, which Brzeski calls the “sugar daddy on the world stage,” “other European countries won’t surpass Germany,” he expects. ‘Many of the challenges facing Germany are also faced by the Netherlands and other countries. For the Netherlands and for the European economy as a whole, this means that there will be minimal growth in the next 2.3 years.’
Brzeski doesn’t expect the recession to last long. ‘In the second quarter we might have a positive surprise, for example that the sector will pick up a bit. Energy prices are also much lower and purchasing power improves throughout the year. However, much higher interest rates will continue to float above the economy and major problems will not go away, the chief economist predicts. “With the US economy perhaps in recession and China less and less dependent on German products”. A permanent recession is therefore not written in the stars, ‘but stagnation is; this is the baseline scenario for the next few years.’