The recession in Germany is here. And the mix of negative factors does not promise a rosy outlook.
Blackout News reports: Germany is currently in recession and the economic outlook is far from positive. The economic upswing through the green transformation, which German Chancellor Olaf Scholz had promised, is likely to fail to materialise in 2024 either. The Blackout News has the story.
The Chancellor’s promise falls more into the category of “wishing for success”, because according to the ruling of the Constitutional Court, the state has no money to strengthen the economy in the long term. The government blames the CDU, which had filed a lawsuit against the unconstitutional budget. But with or without subsidies, the ongoing economic downturn continues to pick up speed and there are many reasons for this (financial market world: 09.01.24).
The green transformation is triggering an economic miracle, as German Chancellor Olaf Scholz said last year. Did he really believe that? Now the Greens around Robert Habeck in particular can point out that they want to, but that the evil CDU has torpedoed the green transformation with their lawsuit in Karlsruhe. But regardless of whether or not climate investments are made by government funds, the recession in Germany is rolling in.
Germany in recession: industrial production and new orders in free fall
The data speak for themselves: new orders and industrial production are declining. In November last year, industrial production recorded a frightening 4.8% year-on-year decline. The last time this level was reached was in July 2020, when the corona crisis was at its peak. This is a worrying sign for the German economy.
One of the factors exacerbating this recession is high energy prices. They cause companies to move their business abroad or even temporarily shut down their production facilities. This process is referred to by some as deindustrialization, as it indicates the decline in industrial activity in Germany.
However, the current economic situation in Germany is not due to just one factor. There are a variety of problems that have a negative impact. These include rising inflation, which is weighing on the retail sector, as well as uncertainty and protests due to austerity measures due to the debt brake.
Germany in recession: rail strikes and structural problems weigh on the economy
Another problem driving the recession is the planned rail strikes. These could have a significant impact on rail transport and exacerbate supply chain problems. The costs for German companies could be significant, especially if production is affected due to a shortage of raw materials.
The forecasts for the German economy are not very encouraging. Although the Bundesbank expects growth of 0.4% in 2024, many economists are sceptical. Some are predicting a recession with gross domestic product (GDP) contracting by 0.3% in 2023. This would set Germany back to 2019 levels and mean a lost half a decade.
There are also structural problems that weigh on the German economy. These include high bureaucracy, high taxes and rising energy costs. These factors lead companies to look for alternatives abroad, where they can find less regulation and more favorable conditions.
Germany’s industry continues to decline: in November, production fell for the third time in a row. Unlike in Switzerland, for example, it is still well below the pre-Corona level.
RECESSION: After two increases in a row, the Ifo business climate fell again in December (86.4 after 87.2). Like the purchasing managers’ indices, it remains in recession territory. Expect a further GDP decline in the winter half of the year and -0.3% in 2024.
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