Germany likely in recession – Bundesbank

Economic output is expected to decline again in the first quarter of the year, the country’s central bank warns

The struggling German economy may shrink further in the first quarter of 2024, the country’s central bank warned in a monthly report published on Monday.

According to the forecast, Germany’s external industrial demand is likely to remain weak, while consumers will continue to be cautious with spending and domestic investment will suffer further from high interest rates.

“There is still no recovery for the German economy… Some stress factors will probably remain in the first quarter of 2024… economic output will therefore again show a slight decline. With the second consecutive decline in economic output, the German economy would be in a technical recession,” the Bundesbank said, referring to the final quarter of 2023, when the country’s GDP contracted by 0.3% in annual terms.

“The weak phase in the German economy that has been ongoing since the beginning of the Russian war against Ukraine will thus continue,” the bank added.

Analysts link Germany’s weak economic performance with the after-effects of the energy crisis that gripped the country after the start of the Ukraine conflict. Western states placed numerous economic restrictions on Russia, which led to the bloc largely losing access to cheap Russian energy. This dealt a particularly strong blow to Germany’s industry-heavy economy, which is now in its fourth straight quarter of zero or negative growth. 

READ MORE: Germany poised for worst downturn in two decades – survey

Germany was the only G7 economy to contract last year. Economists, including at the country’s two largest lenders, Deutsche Bank and Commerzbank, recently predicted another contraction in 2024.

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