Germany enters recession in Q1 after GDP falls by 0.3%

Germany enters recession in Q1 after GDP falls by 0.3%

This follows a drop of 0.5 per cent in Europe's biggest economy during the last quarter of 2022, as the country battled the energy crisis that was unleashed due to Russia's invasion of Ukraine.

FPJ Web DeskUpdated: Thursday, May 25, 2023, 02:07 PM IST
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Germany enters recession in Q1 after GDP falls by 0.3% | Canva

New figures revised by the federal statistics agency show the German economy suffered an unexpected dip in the first quarter of this year, putting the country formally into recession.

Data released Thursday by the Federal Statistical Office shows Germany's gross domestic product, or GDP, down by 0.3 per cent in the first three months of 2023.

Inflation rises as Germany battles energy crisis

This follows a drop of 0.5 per cent in Europe's biggest economy during the last quarter of 2022, as the country battled the energy crisis that was unleashed due to Russia's invasion of Ukraine. Two consecutive quarters of decline constitute a technical recession.

The reducing energy supplies from Russia after the war began sent the price soaring which inturn impacted the inflation and ultimately the economy. According to Destatis, the impact of the rising prices were felt by the consumers in the first three months of 2023 as they controlled spending on items like food and clothing.

The impact of the war was less in comparison to the earlier predictions, but despite the mild winter weather and easing signs of supply chain problems the country is still in the recessionary danger zone.

Recession after government doubles growth forecast

The figures are a blow to the German government, which last month boldly doubled its growth forecast for this year after a feared winter energy crunch failed to materialise.

It said GDP will grow by 0.4 per cent - up from a 0.2 per cent expansion predicted in late January - a forecast that may now need to be revised downward.

Economists said high inflation hit consumer spending, with prices in April 7.2 per cent higher than a year ago.

GDP reflects the total value of goods and services produced in a country. Some experts question whether the figure alone is a useful indicator of economic prosperity given that it doesn't distinguish between types of spending.

With inputs from Agencies

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