Published: January 16, 2024 5:14 am
Author: RT
Growth in the EU’s powerhouse has continued to slow amid persistent economic headwinds
The German economy shrank by 0.3% year-on-year in 2023 after being hit by high inflation, soaring energy prices, and weak foreign demand, the Federal Statistical Office has reported.
The decline in economic output eases to 0.1% when adjusted for calendar purposes, according to a press release issued on Monday. Preliminary estimates show that GDP fell 0.3% between October and December, but an upward revision to the third quarter meant Germany avoided a second straight quarter of contraction, typically defined by economists as a recession.
“Overall economic development faltered in Germany in 2023 in an environment that continues to be marked by multiple crises,” Federal Statistical Office president Ruth Brand said at a press conference in Berlin.
“Despite recent price declines, prices remained high at all stages in the economic process and put a damper on economic growth,” Brand added. She noted that “unfavorable financing conditions due to rising interest rates and weaker domestic and foreign demand also took their toll.”
“Therefore, the German economy did not continue its recovery from the sharp economic slump experienced in the pandemic year of 2020,” Brand stated.
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The report highlighted that overall economic performance in German industry (excluding construction) declined considerably last year, contracting by 2%. This was primarily attributable to much lower production in the energy supply sector. Manufacturing, which accounts for almost 85% of industry (excluding construction), was also in negative territory in 2023, statistics showed. In the construction industry, deteriorating financing conditions had a “particularly noticeable impact on development,” alongside persistently high building costs and a shortage of skilled labor.
Analysts say that even if the German economy does manage to expand this year, persistent industrial and budgetary woes will hamper a recovery from the country’s weakest annual performance in a generation.
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