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German economy officially in recession as inflation, energy crisis hit country

By Christopher Kirkman
|
May 27, 2023

Germany's economy is officially entering a recession, according to new figures released after the first quarter drop in the nation's numbers.

The European leader's GDP fell by 0.3%, based on data released this week by the  Federal Statistical Office.

The concern

"The figures come as a major blow to Germany's government, which just weeks ago boldly doubled its growth forecast for this year after a feared winter energy crunch failed to materialise," the Daily Mail reported.

"The government predicted that GDP will grow by 0.4 percent - up from a 0.2 percent expansion predicted in late January - a forecast that will now likely need to be revised downwards," it added.

The report

“The persistence of high price increases continued to be a burden on the German economy at the start of the year,” the office said, according to CNN.

“This was particularly reflected in household final consumption expenditure, which was down 1.2% in the first quarter of 2023," it added.

Concerning factors

"The latest economic development takes place against a backdrop of high inflation and high interest rates across the region. The European Central Bank is expected to raise rates again at its next meeting on June 15. The central bank has lifted its rates by 375 basis points since July," CNBC reported.

"German Central Bank Governor Joachim Nagel said earlier this week that the ECB has 'several' more rate increases ahead. He is one of the most hawkish members of the central bank," it continued.

Russia an issue

"Robert Habeck, Germany's economy minister, said his nation's previous high dependency on Russia for energy supply led to the recession but the growth forecasts were much bleaker," Reuters reported.

"'We're fighting our way out of this crisis,' Habeck said at an event in Berlin on Thursday," according to the report.

Some have also blamed the issue of the Nordstrom pipeline as an issue impacting the nation's economy, though the economic report did not directly cite the pipeline as a reason impacting the decreased numbers.

The concerns in the American economy appear to be hurting Germany as well, with the rest of Europe likely to experience similar concerns.

The ongoing foreign policy failures and inflationary policies under the Biden administration are part of the global impact, leaving America with the need to lead the way with new directives that could come at the hands of new leadership following the 2024 presidential election.