Bundesbank: Still no recovery in German economy in recession

The Central Bank of Germany (Bundesbank) reported that the growth of the country’s economy is expected to remain stable in the third quarter, possibly due to weak foreign demand and rising financing costs.

The Bundesbank’s August report on the economy has been released.

In the report, it was stated that the main forecasts indicated that the German economy recorded zero growth in the second quarter of the year, and that the outlook for the July-September period of the year was not much better.

The Bundesbank said weak demand from abroad and rising financing costs due to interest rate hikes weighed on the economy, adding that “Germany’s economic output is likely to remain broadly unchanged in the third quarter.”

In the report, which includes that foreign demand for German goods has been on a downward trend recently, it was noted that industrial production will remain weak in the July-September period.

In the Bundesbank report, it was stated that the recovery of China, Germany’s largest trading partner, after the Covid-19 epidemic “lost momentum”, and that rising borrowing costs due to interest rate hikes from the European Central Bank (ECB) to reduce inflation, the investment and construction sector in Germany. It was predicted that it would continue to put pressure on

The bank’s report indicated that inflation may remain above the ECB’s 2 percent target for a long time as price pressures ease very slowly.

THE ECONOMY IS IN RECESSION

The German economy had technically entered a recession, contracting 0.3 percent in the first quarter of the year due to the impact of unusually high inflation and rising interest rates on consumer spending. The 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.

While the German government expects 0.4 percent growth in the economy this year, Germany’s leading economic think tanks expect the economy to contract by 0.2 to 0.4 percent in 2023.

Meanwhile, the German Federal Statistical Office (Destatis) will publish the main GDP data for the second quarter of the year on August 25. (AA)