The German economy contracted 0.3% in 2023, due to high energy costs, high interest rates and a slowdown in foreign demand, which weakened its industrial strength and exports. Thus, GDP fell 0.3% after increasing 1.8% the previous year. “Economic development in Germany has stagnated in the midst of an environment marked by crisis,” said the president of the Federal Statistical Office (Destatis), Ruth Brandt, regarding the data published this Monday by the agency.
In any case, the figure is somewhat better than the forecasts of the German Government and the International Monetary Fund (IMF), which predicted a contraction of 0.4% and 0.5%, respectively, for 2023. But Europe’s locomotive is faring worse than the EU average, which is expected to reach an average growth of 0.6% in the year just concluded, according to the latest forecasts from the European Commission, with marked increases for France, Spain and Italy.
The German economy is burdened by the crisis that its powerful industrial sector is going through, which represents around 20% of the wealth produced in the country and which has lost export capacity in a context of geopolitical tensions and lower demand for products made in Germany in China and the United States. According to Destatis, in addition, private consumption fell by 0.8%, and the construction sector suffered a drop in investments of 2.1%.
The figures available for January and early indicators do not yet point to a quick recovery, the Ministry of Economy admitted in a statement. But you do wait for it throughout the year. For 2024, the Government expects growth of 1.3%, while the IMF places it at 0.9%. “With falling inflation, rising real wages and a gradual recovery of the global economy, the factors weighing on the economy should ease and a recovery should begin,” added the ministry led by Green Robert Habeck.
The Destatis figures were known on the day that the German countryside ended a week of protests against the cut in agricultural subsidies. More than 8,500 protesters, including farmers and truck drivers – who endorse the protest against the increase in tolls – converged on Berlin with 3,000 tractors and 2,000 heavy vehicles. But the Minister of Finance, the liberal Christian Lindner, assured them that the State cannot assume more debt and promised, in return, to lighten the bureaucracy that also burdens the agricultural sector.
