The German economy tipped into the red in 2023 with a fall of 0.3% in gross domestic product (GDP). The fault lies in the crisis in the industrial sector which is suffering from energy costs and export difficulties, the institute said on Monday. Destatis. This expected decline in the GDP of Europe’s largest economy follows growth of 1.8% in 2022, according to data corrected for price variables.
In the last quarter of 2023, GDP is estimated to decline by 0.3% compared to the previous quarter, according to a preliminary estimate from Destatis. In data adjusted for calendar and price variables, annual GDP falls by 0.1%. These results are, however, a little better than the forecasts of the government and the IMF, which forecast a fall of 0.4% and 0.5% respectively during the year. “Global economic development has stalled in an environment still marked by crises, notably the energy crisis and geopolitical tensions,” commented Ruth Brand, president of the Destatis institute.
Weighed down by the crisis in the industrial sector
The German economy has been weighed down throughout the year by the crisis in its powerful industrial sector, which represents around 20% of the wealth produced in the country. Production remains more than 9% below its pre-pandemic level, almost four years after the start of the Covid-19 pandemic, due to a combination of factors. The sector was initially weighed down throughout the year by sluggish domestic demand, due to inflation and interest rate increases by the European Central Bank (ECB).
Over the whole of 2023, inflation increased by 5.9% in Germany, after 6.9% in 2022, which was the highest value since the oil crisis of 1973. The sector was also penalized by less dynamic exports, against a backdrop of geopolitical tensions and lower demand for German products in China and the United States. Above all, energy prices remain relatively high for the industry compared to its international competitors.