Germany recorded a decline of 0.3% in its GDP in the fourth quarter of 2023, according to an estimate published Tuesday which confirms the weakness of Europe's largest economy, whose industry and exports are slowing down.
“After stagnation in the German economy in the first three quarters, economic output declined in the fourth quarter of 2023,” summarized the National Statistical Office Destatis. Over the whole of 2023, the German economy also contracted by 0.3%, Destatis announced earlier in January.
Germany is doing significantly worse than the euro zone average, which achieved growth of 0.5% in 2023, according to Eurostat, with marked increases for France, Spain and Italy.
The country is weighed down by the crisis in its powerful industrial sector, which represents around 20% of the wealth produced.
An exporting powerhouse, Germany is suffering from weak external demand, energy costs for its manufacturing sector and interest rates raised by the European Central Bank (ECB) in a bid to beat inflation.
After this poor end-of-year result, the start of 2024 is also worrying. Business morale in Germany fell again in January, beating analysts' expectations.
Analysts at the Ifo Economic Institute say they are counting on a 0.2% drop in GDP in the first quarter, which would lead Germany into a technical recession (two quarters in a row of falling GDP)
“Companies in almost all sectors of the economy are complaining about falling demand,” Timo Wollmershäuser, head of forecasting at Ifo, said in a statement on Tuesday.
“In manufacturing and construction, the large order books accumulated by companies during the coronavirus pandemic have now melted,” he added.
“Many of the recent brakes on growth will still be present at least during the first months of 2024, and will, in some cases, have an even stronger impact than in 2023,” predicts Carsten Brzeski, analyst at ING.
Added to this are new risks to growth: strikes by German train drivers that paralyzed the country earlier this year and supply chain disruptions due to the military conflict in the Red Sea.