German economy has slipped into recession – but there is still reason for hope?

The German economy slipped into recession at the end of 2023 and is not getting going again. But state finances give reason for hope.

Germany still has the economic downturn under control. Gross domestic product shrank by 0.3 percent in the fourth quarter of 2023 compared to the previous quarter after price, calendar and season adjustments. The Federal Statistical Office confirmed preliminary data.

“This means that the German economy ended 2023 in the red. In the final quarter, declining investments slowed down the economy, while consumption increased slightly,” says head of the authority Ruth Brand. Europe’s largest economy is entering the new year without any tailwind.

Germany slipped into recession in 2023 as a whole. Gross domestic product fell by 0.3 percent compared to the previous year.

There was a ray of hope in public finances. Last year the tax authorities once again spent more money than they took in. However, the federal, state, local and social insurance deficits fell by 9.5 billion euros to a good 87.4 billion euros compared to the previous year, partly because a large part of the expenditure to combat the pandemic was omitted.

Based on overall economic output, the deficit was 2.1 percent according to the latest data from statisticians. The authority initially assumed 2 percent. In 2022 it was 2.5 percent.