Berlin: Germany, Europe’s leading economy, is on the brink of recession as it grapples with various crises, warned the country’s central bank on Monday.
The economic downturn began following Russia’s invasion of Ukraine in 2022, which triggered a surge in inflation. This crisis, coupled with an industrial slowdown and weaknesses in key trading partners, has plunged Germany’s economy into turmoil.
Having contracted by 0.3 percent in the final quarter of 2023, the Bundesbank anticipates another slight decline in output from January to March, potentially pushing Germany into a technical recession, as stated in its monthly report.
The central bank outlined a range of challenges facing Germany, including sluggish foreign demand, limited consumer spending, and reduced domestic investment. Recent strikes, particularly in the rail and aviation sectors, may further impact the economy.
Despite these setbacks, the Bundesbank noted that there’s no clear evidence of a prolonged recession, citing a strong labor market, increasing wages, and a deceleration in inflation as potential sources of support.
After a series of interest rate hikes, German inflation moderated to 2.9 percent in January, nearing the European Central Bank’s target of two percent.
While a rebound is expected this year, concerns persist about the pace of recovery. In December, the Bundesbank revised its 2024 growth forecast to 0.4 percent, down from 1.2 percent predicted in June, signaling a more cautious outlook for Germany’s economic prospects.
