German economy unexpectedly shrinks in Q4 2022

GERMANY’S economy unexpectedly contracted in the fourth quarter of last year, according to data released on Monday (Jan 30), in a sign that Europe’s largest economy may be entering a much-predicted recession as an effect of the war in Ukraine.

The German Federal Statistical Office said that, in adjusted terms, gross domestic product (GDP) decreased 0.2 per cent quarter on quarter. Analysts in a Reuters poll had forecast that the economy would stagnate.

In the previous quarter, the economy grew slightly, by an upwardly revised 0.5 per cent quarter on quarter.

The latest shrink means a recession has become more likely for Germany, as many experts have predicted that the economy will shrink as well in the first quarter of 2023. A recession is commonly defined as two successive quarters of contraction. The Federal Ministry for Economic Affairs and Climate Action said that the situation was expected to improve from March.

Last week, the German government revised its economic forecast for 2023 upwards. It now foresees GDP growing by 0.2 per cent in the year, up from an earlier forecast of a 0.4 per cent decline. REUTERS