The "signs of recession are multiplying" in Germany - Economic Policy

The “signs of recession are multiplying” in Germany – Economic Policy

Germany has entered a phase of “sharp, generalized and lasting decline” in its economy against a backdrop of soaring energy bills for businesses, estimates the German central bank in its monthly bulletin.

The “signs of recession are growing” for the German economy and they are mainly due to the “general economic supply conditions – in particular the energy supply – which have deteriorated considerably as a result of the war of “Russia’s aggression against Ukraine”, indicates the monetary institute in a note with a pessimistic tone.

Inflation still on the rise – nearly 8% in August – and uncertainty about energy supplies and their costs will affect “energy-intensive” sectors that depend on gas in particular, by harming their exports and investments, “but also the private consumption and the service providers who depend on it”, explains the “Buba”.

After the cessation of Russian gas deliveries to Germany, on which the country was 55% dependent before the war in Ukraine, the supply situation for this fossil energy “will be extremely tight in the coming months”, warns- she.

So much so that after its modest increase of 0.1% in the second quarter, GDP should “significantly decline in the fourth quarter” and “probably in the first quarter of the year to come”, according to the monetary institute which does not advance no exact numbers.

We speak of a technical recession in the case of two quarters in a row in decline.

The president of the influential German central bank, Joachim Nagel, had delivered a similar prognosis at the beginning of September, judging “possible” an entry into recession at the end of this year and at the beginning of 2023, a certain number of elements “leaning according to him for this scenario.

One of the main German economic institutes, the IFO in Munich, indicated last week that it expects a technical recession in the first quarter of 2023, with a fall of 0.4% in GDP, after an expected decline of 0.2 % in the fourth quarter of 2022.

The “signs of recession are growing” for the German economy and they are mainly due to the “general economic supply conditions – in particular the energy supply – which have deteriorated considerably as a result of the war of “Russia’s aggression against Ukraine”, indicates the monetary institute in a note with a pessimistic tone. Inflation still on the rise – nearly 8% in August – and uncertainty about energy supplies and their costs will affect “energy-intensive” sectors that depend on gas in particular, by harming their exports and investments, “but also the private consumption and the service providers who depend on it”, explains the “Buba”. After the cessation of Russian gas deliveries to Germany, on which the country was 55% dependent before the war in Ukraine, the supply situation for this fossil energy “will be extremely tight in the coming months”, warns- she. So much so that after its modest increase of 0.1% in the second quarter, GDP should “significantly decline in the fourth quarter” and “probably in the first quarter of the year to come”, according to the monetary institute which does not advance no exact numbers. We speak of a technical recession in the case of two quarters in a row in decline. The president of the influential German central bank, Joachim Nagel, had delivered a similar prognosis at the beginning of September, judging “possible” an entry into recession at the end of this year and at the beginning of 2023, a certain number of elements “leaning according to one of the main German economic institutes, the IFO in Munich, indicated last week that it expects a technical recession in the first quarter of 2023, with a fall of 0.4% in GDP, after a decline expected 0.2% in the fourth quarter of 2022.

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