On Monday, official data showed that Germany’s economy shrank last year. This is the first time that the largest economy in Europe has seen a shrink since the Covid-19 pandemic. The Federal Statistics Office said the gross domestic product (GDP) was lower in 2023. It decreased by 0.3 percent when compared with 2022.
Ruth Brand the president of Destatis (Federal Statistics Office in Germany) said in a statement that the overall economic development had faltered in Germany last year as there were “multiple crises.”
Some factors responsible for the shrink included “rising interest rates” and “weaker domestic and foreign demand.”
Although inflation has eased, prices are still high. The country also narrowly missed a recession last year, and analysts believe that 2024 will also show weak economic growth.
Many economists have predicted that global growth will be weak in 2024. The prediction of a weak economy in Germany does not bode well for the rest of Europe, as Germany is the largest economy in the bloc.
Germany’s manufacturing sector has been dealt with the most significant blow due to several factors, such as weakening demand from China, an increase in energy costs fueled by the Russia-Ukraine conflict, and an increase in interest rates in Europe.
Destatis reported that car and other transport manufacturers grew, but industries such as chemicals and metals declined. The overall decline in industrial production was 2 percent. Germany also faced a 1.8 percent decrease in exports.
Germany faced the new year with challenges, including a rail strike that lasted for three days. Farmers also protested the government’s plan to cut fuel subsidies. The government has been missing on spending to manage the economy.
Germany saw one positive trend as employment grew by 0.7 percent. Destatis said that this trend was able to offset the effects caused by an aging German population. Analysts believe that there could be zero percent growth in 2024.
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