The recession in Germany, the largest economy in Europe, is deepening more than expected. Concerns are rising that the recession will be prolonged due to inflation, slowed consumption, and a sharp decline in exports to China.
On the 28th (local time), the German Federal Statistical Office announced that Germany's GDP growth rate for the second quarter was preliminarily estimated at -0.2% compared to the previous quarter. Following negative growth in the fourth quarter of last year (-0.4%) and the first quarter of this year (-0.3%), Germany has not escaped three consecutive quarters of negative growth.
Clemens Fuest, president of the Ifo Institute in Germany, said in an interview with Bloomberg TV, "The German economy is having great difficulty escaping the recession."
Germany's sluggishness is interpreted as the result of a combination of variables such as inflation, the energy crisis caused by the Ukraine war, and supply chain issues, which have rapidly cooled the economy.
Germany, the largest importer of Russian natural gas, saw gas supplies from Russia cut off after the Ukraine war, and its manufacturing sector was hit hard by a slowdown in trade due to decreased demand from China, its largest trading partner.
In May, Germany's industrial production fell by 0.2% compared to the previous month. After showing strong performance in January (3.5% increase) and February (2.0%) this year, it recorded the largest decline in a year in March (-3.4%) and has continued to show a sluggish trend.
A decrease in private consumption due to high inflation is also a major factor in the sluggishness. The German Statistical Office announced that Germany's Consumer Price Index (CPI) in July rose 6.7% compared to the same period last year. Although lower than the sharp rise in the second half of last year caused by the energy crisis, it remains high compared to three years ago when it was below 1%.
Foreign media predicted, "As purchasing power declines, private consumption has decreased, leading to reduced government spending," and "High interest rates will further shrink private consumption capacity."
As the recession prolongs, there are forecasts that Germany will be the only country among the Group of Seven (G7) to experience negative economic growth this year. The International Monetary Fund (IMF) projected in its World Economic Outlook (WEO) report released on the 25th that Germany's economic growth rate for this year will be -0.3%, making it the only G7 country to contract economically.
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