Germany’s economy has succumbed to a recession in the first quarter of this year, as per the revised growth data, primarily due to persistent inflation. Experts also attribute the economic decline to the disruption caused by the halt in Russian gas supplies following the invasion of Ukraine.

According to the statistics office, the German economy contracted by 0.3% between January and March, following a 0.5% contraction in the previous three months.

A country is considered to be in a recession when its economy shrinks for two consecutive quarters.

“Andreas Scheuerle, an analyst at DekaBank, stated, “Under the immense weight of inflation, German consumers have been brought to their knees, dragging the entire economy down.

In April, Germany’s inflation rate stood at 7.2%, exceeding the average of the eurozone but remaining below the UK’s 8.7%.

The rising prices have significantly impacted household spending on essential items like food, clothing, and furniture, while industrial orders have weakened due to higher energy costs faced by businesses.

“The persistence of high price increases continued to burden the German economy at the beginning of the year,” said the federal statistics agency, Destatis.

Initially, the agency had estimated zero growth for the first quarter, indicating Germany’s avoidance of a recession. However, revised figures unveiled a 1.2% decline in household spending compared to the previous quarter.

Government spending also dropped by 4.9%, and car sales were adversely affected by reduced government grants for electric and hybrid vehicles.

Although the recession was not as severe as anticipated, considering Germany’s heavy dependence on Russian energy, the impact of higher energy prices was mitigated by a mild winter and the reopening of China’s economy.

While private sector investment and exports experienced growth, it was insufficient to pull Germany out of the recession danger zone, according to analysts.

LBBW bank analyst Jens-Oliver Niklasch noted, “The early indicators suggest that weakness will persist in the second quarter of 2023.”

However, the German central bank, the Bundesbank, expects a modest growth in the economy during the April to June quarter, with a rebound in the industrial sector offsetting stagnant consumer spending.

The International Monetary Fund (IMF) predicts Germany to be the weakest among the world’s advanced economies, projecting a contraction of 0.1% this year. Meanwhile, the IMF upgraded its forecast for the UK, expecting growth of 0.4% instead of the previously estimated decline of 0.3%

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