The German economy is likely to have stagnated in the fourth quarter of 2022 having grown by 1.9 per cent over the whole year, according to the federal statistical agency, suggesting it may escape a recession this winter.
“The economy performed well in 2022, despite the energy crisis and massive price hikes as a result of the war in Ukraine, material and supply bottlenecks and the continuing coronavirus pandemic,” said Ruth Brand, head of the statistical agency.
German gross domestic product exceeded its pre-pandemic level of 2019 for the first time, she added, with growth in the eurozone’s largest economy boosted primarily by private consumption and investments in equipment.
Germany had hoped for a big economic recovery in 2022 after two years dominated by the Covid-19 pandemic, but Russia’s invasion of Ukraine nearly 11 months ago plunged the country into an energy crisis. Business confidence slumped in the summer as gas and electricity prices surged and the threat of blackouts, gas rationing and production shutdowns loomed.
However, morale has improved considerably in recent weeks as a result of greater fiscal support from the government, lower gas prices and a mild autumn and early winter that kept a lid on energy consumption.
Economists still predict a recession in 2023, defined as two successive quarters of negative growth, but think it will now be milder than previously expected. Some are forecasting a contraction of less than 1 per cent in GDP, while others suggest there could even be positive growth this year, largely thanks to the federal government’s energy aid packages.
The statistical agency on Friday said it could not provide a definitive readout of economic output in the fourth quarter of 2022, but “based on our current knowledge, GDP stagnated in the fourth quarter . . . after growing in the third quarter”.
Michael Kuhn, a senior economist at the agency, said the German economy had “developed really well” in November, “[but] for December we’re seeing some indications that this development has declined”.
GDP growth in 2022 was slower than the 2.6 per cent registered a year earlier, and the statistics agency also noted that “almost all other European countries” saw higher growth in 2022 than Germany. But the official statistic was still higher than the mid-range forecast of 1.8 per cent from a Reuters poll of economists.
Germany recorded a budget deficit of €101.6bn, which made up 2.6 per cent of GDP. That compares with the big deficits of the pandemic years, amounting to 4.3 per cent of GDP in 2020 and 3.7 per cent in 2021.
The number of people in work rose by 1.3 per cent to reach 45.6mn people in 2022, the agency said. Consumer prices rose 7.9 per cent in 2022, largely driven by the inflation in energy and food prices due to the war in Ukraine and supply chain bottlenecks.
In a further sign of the eurozone economy’s resilience at the end of last year, industrial production rose by 1 per cent in November, beating the 0.5 per cent rise forecast by economists polled by Reuters.
The figures published by Eurostat on Friday showed that the rebound was driven by capital goods, with the easing of supply chain disruptions helping car production.
Germany, by far the eurozone’s largest manufacturer, posted a 0.6 per cent expansion in industrial production for November.
Additional reporting by Valentina Romei