📉 Germany in reverse gear 📉
📌 The Federal Statistical Office Destatis reported that 2023 ended with the GDP declining by 0.3%. This was the biggest slowdown since 2020, when the Covid pandemic had sent the economy down 3.8%, breaking a 10-year positive upward trail. According to IMF estimates last year, among the large economies, Germany filed the worst performance worldwide: the U.S. economy is expected to close up 2.1%, the Eurozone 0.7% and the U.K. 0.5%, worse even than France, Italy and Spain, which will record a growing GDP.
📌 The outlook for 2024 is not positive either: several analysts had already cut their forecasts when the government had to reduce spending plans to deal with a 60 billion euro hole in Germany’s accounts, which came to light thanks to a constitutional court ruling on some funds posted off-budget.
📌 There are two main reasons explaining this: the loss of cheap Russian energy and lower exports, especially to China. Despite price declines, German industrialists complain that they still pay three to four times more for energy than they did before the Russian invasion of Ukraine and more than five times as much as their U.S. competitors. The automotive sector seems to be the one that took the worst hit, as German car companies are not being able to stand the competition against their peers from China and the US.
📌 Retail sales, which also appeared to be declining, did not help GDP either. Households have been hit by the largest cost-of-living increase this generation has ever seen. Inflation has fallen from over 11 percent at the end of 2022 to a low of 2.3 percent last November. «Despite the recent declines, however, prices have remained high at all stages of the economic process and have put a drag on economic growth,» Brand said, again explaining the statistics agency’s data.