The German economy will grow 1.9% in 2022

Germany’s economy likely stagnated in the last quarter of 2022 after growing 1.9 percent over the full year, according to the federal statistics agency, suggesting it could escape recession this winter.

“The economy did well in 2022, despite the energy crisis, 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 statistics agency.

It added that German gross domestic product exceeded its pre-pandemic level in 2019 for the first time, with growth in the eurozone’s largest economy mainly fueled by private consumption and investments in equipment.

Germany had hoped for a major 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 declined in the summer as gas and electricity prices soared and the threat of power outages, gas rationing and production shutdowns loomed.

However, morale has improved dramatically in recent weeks as a result of greater fiscal support from the government, lower gas prices, and a mild fall and early winter, which curbed energy consumption.

Economists still expect a recession in 2023, which is defined as two consecutive quarters of negative growth, but they believe it will now be more moderate than previously expected. Some expect a contraction of less than 1 percent in GDP, while others suggest there could be positive growth this year, thanks in large part to the federal government’s energy aid packages.

The statistics agency said on Friday that it could not provide a definitive reading of economic output in the fourth quarter of 2022, but that “based on our current knowledge, gross domestic product stagnated in the fourth quarter . . . after growing in the third quarter.”

The German economy “developed really well” in November, said Michael Kuhn, chief economist at the agency.[but] For the month of December, we are seeing some indications that this development has abated.”

GDP growth in 2022 was slower than the 2.6 percent recorded in the previous year, and the statistics agency also noted that “nearly all other European countries” experienced higher growth in 2022 than Germany. But the official statistic was still above the mid-range forecast of 1.8 percent in a Reuters poll of economists.

Germany recorded a budget deficit of 101.6 billion euros, which is 2.6 percent of GDP. This compares to the large deficits in the pandemic years, which amounted to 4.3 percent of GDP in 2020 and 3.7 percent in 2021.

The number of employed people rose 1.3 percent to 45.6 million people in 2022, the agency said. Consumer prices rose 7.9 percent in 2022, largely driven by energy and food price inflation due to the war in Ukraine and supply chain bottlenecks.

In another sign of the resilience of the eurozone economy at the end of last year, industrial production rose 1 percent in November, outpacing the 0.5 percent increase economists had forecast in a Reuters poll.

Figures published by Eurostat on Friday showed that the recovery was driven by capital goods, with an easing of supply chain disruptions that helped produce cars.

Germany, the largest producer in the eurozone, recorded a 0.6 percent expansion in industrial production for the month of November.

Additional reporting by Valentina Romei

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