Due to its heavy reliance on Russian natural gas, Germany found itself in a dangerous situation after the outbreak of the Russian invasion of Ukraine. Due to the sudden increase in energy and commodity prices, the cost of living for consumers is soaring and business confidence in the local economy is low.
“The German economy will shrink at least three-quarters in a row until spring 2023,” said Dennis Huchzermeier, chief economist at the Handelsblatt research institute, which is part of the publishing group of the same name.
“However, this will be an atypical recession as labor demand remains high and manufacturers still have a large backlog of orders to process,” he added. A recession is defined as at least two consecutive quarters of economic decline.
The German government expects a recession next year
Economic
Economists have revised their price growth prospects upwards next year. Inflation in the eurozone is now estimated at 5.5 percent on average, up from five percent previously. Germany saw the largest upward revision among the bloc’s major economies.
The European Central Bank (ECB) is expected to raise interest rates further. The deposit rate is expected to reach a maximum of 2.5 percent in the first quarter of next year. The first rate cut is expected in the second quarter of 2024.
