Economists warn of worse days to come for Germany: The Telegraph

By Al Mayadeen English
Source: The Telegraph
29 Sep 2023 20:15
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Germany's economy faces a deeper-than-expected slump as it grapples with an energy crisis and supply chain disruptions, according to economists cited by the Telegraph.

Traders present their goods at a weekly market in Gelsenkirchen, Germany, on Thursday, Sept. 28, 2023 (AP)

Germany, long regarded as an industrial powerhouse and the economic engine of Europe, is now grappling with a more severe downturn than previously anticipated, a new report by The Telegraph shows.

Economists have issued warnings of an impending economic slump due to the country's energy crisis and disruptions in supply chains.

Despite initial forecasts suggesting that Germany would avoid a recession, a consortium of influential economic institutes has conveyed to the German government that stagnation is eminent.

Germany's Gross Domestic Product (GDP) is projected to contract by 0.6% this year, a significant departure from the earlier forecast of 0.3% growth predicted in the spring.

The year commenced with a winter recession in Germany, which subsequently plateaued in the three months leading up to June.

However, the country is now experiencing a renewed contraction, with an expected decline of 0.4 percent in the third quarter of the year.

Germany's prospects of avoiding a full-blown recession hinge on meeting growth forecasts of 0.2 percent of growth in the fourth quarter of the year.

According to Oliver Holtemöller at the Halle Institute for Economic Research, the recovery from the energy crisis has been disappointingly sluggish.

"The most important reason for this revision is that industry and private consumption are recovering more slowly than we expected in spring," Holtemöller explained.

The outlook for growth in the coming years remains subdued, with an anticipated rebound to 1.3% next year and 1.5% in 2025.

Carsten Brzeski, an economist at ING, expressed concern, referring to Germany as "the sick man of Europe" and pointing to a combination of cyclical headwinds, structural challenges, and underinvestment in areas like digitalization, infrastructure, and education as contributing factors to Germany's economic woes.

One glimmer of positivity amid the economic gloom is the rapid decline in inflation within Germany. Falling inflation is expected to alleviate financial pressure on households, with consumer prices rising by 4.5% year-on-year, a significant reduction from the 6.1% inflation rate recorded in August.

Energy prices, which had previously surged, only rose by 1% year-on-year, down from the 8.3% increase recorded the prior month. Food price inflation also moderated, dropping from 9% to 7.5%, while goods and services experienced a slowdown, registering 5% and 4%, respectively.