March 4. 2024. 7:17

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German central bank predicts recession


Germany’s GDP is expected to decrease for the second quarter in a row, meaning the country is officially in a recession, according to predictions from the country’s central bank.

The German Federal Bank published on Monday its monthly report, predicting a shrinking economy for two quarters in a row – a trend economists characterise as a recession.

“The economic output is likely to be smaller again in the first quarter of 2023 compared to the previous quarter,” the bank warned.

The report noted that lacklustre industrial output, a decrease in foreign demand and the ailing building sector impacted by rising interest rates and input costs all dampen this quarter’s economic forecast.

“Moreover, inflation continues to be high and diminishes private households’ purchasing power,” likely leading to less private consumption in the first months of 2023, it continues.

While the bank expects the situation to relax slightly throughout the year, the report warns that “a significant improvement is not to be expected.” For 2023 overall, the bank expects a slight decrease in the country’s GDP.

The report comes after the European Commission said in an economic outlook published in January that it expects Germany to be able to avoid a recession in 2023, predicting a slight growth of 0.2% instead.

Meanwhile, the Federal Bank also expects Germany’s debt burden to grow since “expenditure is set to increase significantly more than revenues.”

(Julia Dahm | EURACTIV.de)