Germany’s energy crisis over – Nagel

Bundesbank President Joachim Nagel has dismissed concerns about Germany’s economy and its future energy security, asserting that the country’s economy has the “inherent strength” to bounce back from the pandemic and the war in Ukraine. Nagel’s comments come after the International Monetary Fund forecast a contraction of 0.1% in German GDP in 2023, with the country becoming the second-worst performer among major economies after the United Kingdom, before expanding by 1.1% in 2024.

The German economy shrank by 0.4% in Q4 2022 and is expected to contract again in Q1 2023, plunging the country into a technical recession. Nonetheless, Nagel told CNBC that he is “more positive than the IMF” and does not foresee a recession this year. He emphasised that Germany’s energy crisis was more or less solved, and the outlook for the country is good, given its diversification of liquefied natural gas supply away from Russia and increased storage capacity resulting from the mild winter.

The latest purchasing managers’ index readings showed that German manufacturing, which accounts for a fifth of the country’s economy, experienced its sharpest fall in activity in almost three years in March and hit its lowest level since May 2020. However, Nagel argued that this was due to the lingering effects of Covid-19 and the war in Ukraine, and that the country’s industry has the capability to deal with the situation. He expressed confidence that the country’s economy has an inherent strength and that it will overcome the current challenges and return to the levels seen before the pandemic.

Nagel’s comments reflect a sense of optimism about Germany’s economy despite concerns about its recent contraction and the challenges posed by energy security. The country’s efforts to diversify its energy sources away from Russia have been met with success, and its increased storage capacity could help the economy weather the next cold season. Nonetheless, concerns about the ongoing war in Ukraine and the impact of Covid-19 on the country’s manufacturing sector persist, and it remains to be seen how these challenges will affect Germany’s economic recovery in the coming months.