German economy slides 0.4% in Q4’22

The German economy experienced a decline of 0.4% in gross domestic product (GDP) during the fourth quarter of 2022, compared to the previous quarter, according to Federal Statistical Office Destatis. The early figures suggested a milder decline of 0.2%. The economy lost momentum due to the high inflation caused by soaring energy prices, which exceeded 10% at the end of the year. In January, the inflation stabilised at 8.7% with relief measures.

Private consumption, which supported Germany’s economy following the end of COVID-19 restrictions last year, declined by 1.0% in Q4 due to falling real wages caused by high inflation. Lower levels of investment also marked the economic downturn in Q4 2022, with construction investment falling by 2.9% and investment in equipment, such as machinery, appliances, and vehicles, dropping by 3.6%, according to Destatis.

According to recent calculations published by the German Economic Institute (IW), the COVID-19 pandemic and the Russia-Ukraine conflict will cost Germany’s economy a total of 595 billion euros (631 billion U.S. dollars) in added value by the end of 2023. IW economist Michael Groemling said that the extraordinary situation would continue to affect the economy, weighing on prosperity in the coming months. The figures suggest that Germany’s economic recovery will be sluggish, and high inflation will remain a challenge to the country’s economy.