German economy shrinks in final quarter of 2023
January 30, 2024
Germany's gross domestic product (GDP) fell by 0.3% in the last quarter of 2023, the Federal Statistical Office (Destatis) reported on Tuesday, confirming their previous estimates.
Facing high inflation, high interest rates, a low demand for German exports and a series of strikes, Europe's largest economy saw its GDP also fall 0.3% for the entire year of 2023, according to the preliminary government data.
Germany is also expected to face a rough 2024, with economists predicting further shrinking in the first quarter of this year.
"The German economy has not grown for almost two years and there is no turnaround in sight," Sebastian Dullien from the IMK Institute told Reuters.
"The weak fourth quarter of 2024 points to a weak start in the new year — the best-case scenario for the first quarter is minimal growth. There is even the risk that the German economy shrinks further," he added.
Sick man of Europe?
Once considered the economic behemoth of the Eurozone, Germany has more recently been derided as the "sick man of Europe."
However, it was not the only poor performer, with France seeing its economy stagnate. At the same time, Italy — the EU's third biggest economy — saw its GDP grow by 0.7%, while Spain — the EU's fourth biggest economy — saw a whopping 2.5% growth.
All these figures were released on Tuesday.
German Finance Minister Christian Lindner has tried to paint a more positive picture, telling the World Economic Forum in Davos earlier in January that "Germany is not the sick man" but rather "a tired man" following the recent years of crisis, who was in need of a "good cup of coffee" — which is to say, structural reforms.
Lindner's own pro-market Free Democrats (FDP) — the most junior partner of the ruling coalition government — has refused to budge on keeping Germany's "debt brake" in place.
A uniquely German financial policy, the "debt brake" stops the government from borrowing more money in an attempt to keep the books balanced. This policy has been criticized by many economists, especially outside of Germany, who have pointed out that borrowing is necessary for investing in the country's future, such as with green restructuring.
ab/mf (dpa, Reuters)
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