Recession’s First Target-Germany

Germany, a nation known for exports of automobiles, machinery, and chemicals is now in the news in the economic crisis. As the world continues to fight the pains of inflation, and gains made, Germany is the first nation to fall into recession. Despite the European central bank’s chief continuing to state that steps were taken, Germany’s economic fundamentals did not hold good.

Leading factors to the cause

The nation is said to have faced multiple issues since the beginning of the decade. With the start of the pandemic and the war in Ukraine, the supply of various goods and services was affected. To top it all GDP (gross domestic product) of Germany is said to have contracted in two quarters in a row by 0.3 percent. In general, the output of the nation has fallen by 0.2 percent. Consumer spending is said to have fallen drastically due to the rise in prices, which saw a fall in purchases of food, furniture, and clothes.

As per the official data of the Federal Statistics Office of Europe, the government of Germany reduced its spending by 4.9 percent, when compared to the last quarter. The essentials such as heating had risen to a great extent, keeping a huge chunk of the economy from further investment to the economy. The inflation control measures are said to be having a slow impact on the activities in the economy. Though there are measures taken to control the rising inflation, which currently stands at 7 percent, we need to keep a close watch on the future decisions of the ECB (European Central Bank).

Adding to this, the recent release of the CPI (Consumer Price Index) data is said to be at an elevated rate of 6.1 percent for May. Though it is said to be a reduction from 7.1 percent from the previous month, The figures still show significantly high rates continue to deter consumption in the economy.

The exports of Germany have always been the strong point of its economy and its main source of forex revenue. There has been a sharp decline in exports due to the fall in demand from the major economies across the globe in the first quarter of 2023. As per the March data of 2023, the data showed exports fell by 5.2 percent. Many economists in Germany have pointed the reason for this is the anticipated slowdown in the US economy.

Future ahead

With the economy in “mild recession,” the recovery is going to be very sluggish for the rest of 2023. The economy continues to struggle to bring the economic indicators to healthy numbers. The way forward is to control the inflation in the economy, by making sure it does not go overboard to make it further worse off. With the kind of sentiment, we have worldwide, a constant threat of slowdown and recession threats, the recovery for the economy looks slim. As per experts' opinion, it's anticipated by 2024 or by mid of 2025, everything would return to normal.