Germany, Europe's largest economy, shrank last year

Published: Jan. 15, 2024 at 6:37 am ET

FRANKFURT, Germany (AP) — Germany's economy shrank 0.3% last year as Europe's former powerhouse grappled with more expensive energy, higher interest rates, a shortage of skilled labor and a domestic budget crisis.

Europe's largest economy has been stagnant since the last months of 2022 amid many of those challenges. The International Monetary Fund expected Germany to be the worst-performing major developed economy last year, a major shift from its place as a model for how to expand as other countries struggle.

FRANKFURT, Germany (AP) — Germany's economy shrank 0.3% last year as Europe's former powerhouse grappled with more expensive energy, higher interest rates, a shortage of skilled labor and a domestic budget crisis.

Europe's largest economy has been stagnant since the last months of 2022 amid many of those challenges. The International Monetary Fund expected Germany to be the worst-performing major developed economy last year, a major shift from its place as a model for how to expand as other countries struggle.

Germany's economy may have contracted by 0.3% in the fourth quarter after stagnating in the third quarter, the central statistics office said in a preliminary estimate on Monday. Official figures for the last three months of 2023 are expected to be announced on January 30.

See also: A Davos poll found that three-quarters of chief economists expect 'weak' or 'very weak' growth in Europe this year.

Meanwhile, the debate continues as to why Germany stalled. Energy-intensive industries must pay higher natural gas prices after losing cheap supplies from Russia following its invasion of Ukraine, and a burst of inflation has kept consumers from spending.

READ  Top City strategist says healthy economic growth will follow

Meanwhile, companies complain that they can't fill highly skilled jobs, and the global slowdown in manufacturing has been felt in the country's large factory sector.

The European Central Bank's high interest rates aimed at controlling inflation have stifled the construction of new apartments and offices.

The government is facing a budget crisis after Germany's constitutional court ruled that tens of billions of euros (dollars) spent to cushion the fallout from the Covid-19 pandemic could not be reinvested into measures to help fight climate change and modernize the country. The 2023 and 2024 budgets had to be reworked.

Others point to a lack of long-term investment in infrastructure such as rail networks and high-speed internet as the government focuses on curbing deficit spending under a 2009 constitutional amendment.

Dodaj komentarz

Twój adres e-mail nie zostanie opublikowany. Wymagane pola są oznaczone *