The economy in Germany has grown again.
(Photo: mauritius images / Manfred Bail / imageBROKER)
The German economy grew last year despite the energy crisis, record inflation, material shortages and increased uncertainty caused by the Russian war against Ukraine. The Federal Statistical Office published today (Friday) an initial estimate of the development of gross domestic product. Economists surveyed by the Reuters news agency expect growth of 1.8 percent. However, it would be lower than in 2021, when it was enough for an increase of 2.6 percent.
Despite the loss of purchasing power due to sharply rising prices, consumers in particular are likely to have boosted the economy with their consumer spending. In the first Corona years, many consumers had saved additional money due to unusual trips, restaurant or concert visits, which were now at least partially spent again. Companies are also likely to have invested more in equipment such as machines and vehicles. On the other hand, construction spending is likely to have fallen due to higher borrowing costs. Exports have also increased, but probably less than imports.
In the current year, the severe economic slump expected at times should not occur. “There is now a consensus that there will be no deep recession like after the financial crisis or Corona in the euro area and in Germany,” said Commerzbank chief economist Jörg Krämer. “After all, a gas shortage has become unlikely.” In addition, the federal government’s aid packages are so large that the state will assume the entire increase in the German energy bill. The Kiel Institute for the World Economy (IfW) predicts growth of 0.3 percent for this year, which should accelerate to 1.3 percent in 2024.
However, the risks remain great. An escalation of the Russian war against Ukraine is just as much a part of this as the current virus wave in Germany’s most important trading partner China, which could lead to disrupted supply chains again. This in turn could hamper production. Inflation is also likely to remain high and weigh on real incomes, even if inflation is lower than last record year’s 7.9 percent.
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