Europe's largest economy Germany will fall into recession in 2023: OCED
Germany is facing soaring inflation, particularly in energy prices, after Russia cut gas supplies through the Nord Stream pipeline as tensions mount over the Ukraine war
Fog drifts by the banking district in Frankfurt, Germany, Monday, Sept. 26, 2022. (AP Photo/Michael Probst)
New Delhi: Europe’s largest economy Germany will fall into recession in 2023, the Organisation for Economic Co-operation and Development said on Monday.
Apart from the intergovernmental organisation, the Ifo institute also sounded an alarm for the German economy which has been hit hard by an energy crisis.
Germany’s business climate deteriorated sharply in September, according to a key survey published by the institute on Monday.
The Ifo institute’s monthly confidence barometer, based on a survey of about 9,000 companies, slipped 4.3 points to 84.3 from the previous month.
It was the fourth straight month of contraction, taking the indicator to its lowest level since May 2020, with the decline felt across the economy, from manufacturing to the service sector.
“The German economy is slipping into recession,” said Ifo president Clemens Fuest.
“Pessimism regarding the coming months has grown decidedly.”
Energy prices spike as Russia cuts gas supplies
Germany is facing soaring inflation, particularly in energy prices, after Russia cut gas supplies through the Nord Stream pipeline as tensions mount over the Ukraine war.
While all of Europe is affected, Germany has been hard hit as it was heavily reliant on Russian supplies prior to the war.
A recession in Germany was now “inevitable”, said ING analyst Carsten Brzeski, pointing to “high inflation, surging energy prices, ongoing supply chain frictions and weakening global demand”.
In the survey, confidence in the manufacturing sector — a driver of the German economy — fell particularly sharply, recording a drop of 14.2 points.
Businesses’ assessment of the current situation also fell 3.0 points to 94.5 points.
The barometer was the latest warning that Germany is heading for a contraction, with the OECD also forecasting Monday that Europe’s economic powerhouse would shrink next year.
German GDP grew a slight 0.1 percent between April and June.
Inflation rose at a 7.9-percent rate in Germany in August, well above the two-percent target of the European Central Bank.
With inputs from AFP
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