The German economy is stagnating. Between April and June, the gross domestic product remained unchanged compared to the first quarter, as the Federal Statistical Office announced on Friday. In the first three months of 2022, however, growth was still significantly higher than according to initial calculations: from January to March, GDP did not increase by 0.2 percent as initially estimated, but by 0.8 percent, as the statisticians reported. But now the trend is downwards.
“With the GDP stagnating in the second quarter, a recession is becoming more and more likely,” commented Wolfgang Niedermark, member of the executive board of the Federation of German Industries (BDI). The companies are suffering from the consequences of the Ukraine war, a long-term gas shortage and the effects of the Covid pandemic. DIHK General Manager Martin Wansleben also warned: “It could get even worse.” KfW chief economist Fritzi Köhler-Geib explained that “a recession is in the air”.
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Federal Minister of Economics Robert Habeck (Greens) called the economic situation “extreme” on Friday, he recently spoke of the “biggest energy crisis in Germany”. During a visit to the glass manufacturer Wiegand Glas in Schleusingen in Thuringia, in addition to the energy and corona problems, he also mentioned structural issues such as the shortage of skilled workers and planning and approval processes that were too long.
As a result, Germany is increasingly becoming the problem child in Europe. Several countries published their growth figures on Friday – Germany does poorly in comparison. The economy in Sweden grew the strongest at 1.4 percent, according to the statistics authority mainly due to strong consumption. In Spain, GDP increased by 1.1 percent. Italy’s economy grew by 1.0 percent, in France growth was 0.5 percent, according to the statisticians due to good figures in foreign trade. In Austria, too, the increase was 0.5 percent.
In Portugal, on the other hand, the economy shrank by 0.2 percent from April to June. Performance fell the most in Lithuania, by 0.4 percent, and in Latvia, by as much as 1.4 percent. Overall, GDP in the euro zone grew by 0.7 percent in the second quarter.
The updated economic forecast by the International Monetary Fund (IMF) this week identified Germany as a brake on the European economy. While the euro zone will grow by 2.6 percent in the current year, the IMF only expects Germany to grow by 1.2 percent. That also seems optimistic in view of the current situation.
Germany’s weakness compared to neighboring countries is also due to the structure of the local economy. The export-oriented German industry is feeling the effects of the supply chain problems as a result of the pandemic. In addition, Germany is more dependent on gas from Russia than other countries. In the second quarter, the economy was primarily supported by private and government consumer spending. On the other hand, the trade balance – which has always been the basis of German prosperity – dampened growth. In July, Germany imported more goods than it exported for the first time in years.
In terms of inflation, however, the Federal Republic is in a better position than many other euro countries. Overall, the rate of inflation in the euro area rose to a record 8.9 percent, as reported by the statistics agency Eurostat on Friday. On Friday, the Federal Statistical Office announced an inflation rate of 7.5 percent for Germany in July. However, Eurostat calculates the value differently. According to this method, the German value in July was 8.5 percent.
However, the numbers in the monetary union vary widely. The value in Estonia is 22.7 percent, in Latvia 21 percent and in Lithuania it was 20.8 percent. In France – where the state limits energy prices by law – it is 6.8 percent. The values ​​are also comparatively lower in Malta (6.5 percent) and Italy (8.4 percent).
