More bad news for German economy; Growth unlikely in Q1 2024
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Bloomberg reports that Germany's GDP is expected to stall in the first three months of 2024.
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Germany flag in front of a board showing stocks of German companies on the country's Borse exchange in 2018. (AFP)
The German economy likely will not experience growth at the beginning of 2024 following a contraction in the last quarter of the previous year, Bloomberg reported on Monday.
Europe's powerhouse has been struggling for the past few years, mainly due to the Covid pandemic, followed by Western sanctions on Russia - Germany's top energy provider previously - following the start of the war in Ukraine in February 2022.
Read more: German economic output will continue to suffer in the near future
The country's GDP is now forecasted to stall during the first quarter of 2024, experts told Bloomberg, with a third of them expressing more pessimism and expecting a contraction.
The Federal Statistics Office reported that Germany's GDP shrank 0.3% over the full year 2023, with the office's chair Ruth Brand explaining that "overall economic development faltered in Germany in 2023 in an environment that continues to be marked by multiple crises."
“The data still point toward a modest contraction in the first quarter, although it seems like the bottom is near,” Rabobank macro strategist Erik-Jan van Harn told Bloomberg. “Sentiment improved a little in the manufacturing sector, while activity remains robust in the services sector.”
In particular trouble
Bloomberg had reported last week that investors who lend money to German firms are now demanding higher interest rates than companies in the rest of the eurozone.
Additionally, businesses have borrowed far less money to invest in manufacturing, machinery, and technology, indicating that Germany's economic development is stifled in the long run, since businesses are now more focused on solving their challenges.
This is due to several factors, including a weak economy, real estate issues, and Germany's reputation as having the highest corporate distress score in Europe.
Brian Mangwiro, a fund manager at Barings, told the outlet that Germany in particular is facing challenges not particullay present in other industrial countries.
“Germany is really in trouble…All the big manufacturing economies are slowing, but in Germany, this is compounded by higher energy costs. There are also challenges in the auto sector with competition coming from China."
Meanwhile, German Finance Minister Christian Lindner said that the country's inability to generate growth in the economy is bringing more poverty.
