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Germany: European Commission cuts 2023 growth forecast

September 11, 2023

Germany is set for a recession this year, with an expected 0.4% fall in economic activity, according to the EU's latest prediction.

https://p.dw.com/p/4WBhQ
Container ships in the industrial port of Duisburg, Germany
High energy prices and lower demand from China have left Europe's largest economy strugglingImage: Rupert Oberhäuser/picture alliance

The German economy is expected to contract in 2023, the European Commission said on Monday.

Germany's gross domestic product is now forecast to shrink by 0.4% in 2023, compared to a previous prediction of 0.2% growth.

The Ukraine war and its toll on energy prices hit the manufacturing sector "particularly hard," the commission said. 

Scholz: Germany must pull together to overcome economic crisis

Weak demand keeps eurozone economy under pressure

The eurozone is expected to see 0.8% growth in 2023, down from the 1.1% that had been previously predicted. It is expected to post growth of 1.3% in 2024, down from 1.6%.

The 20-member bloc entered a recession in the first quarter of the year. The economic slowdown is a result of weakened demand due to high inflation rates, the commission said.

"Weakness in domestic demand, in particular consumption, shows that high and still increasing consumer prices for most goods and services are taking a heavier toll than expected," the commission said.

"Further weakening" was expected in the coming months as the economy faces "multiple headwinds," EU Economy Commissioner Paolo Gentiloni said at a news conference.

"The EU economy has suffered two massive shocks with the pandemic and Russia's unprovoked war in Ukraine," Commission Vice President Valdis Dombrovskis added.

Germany is the only major economy expected to shrink this year

Even though economic activity has been slowing in all major eurozone economies, Germany has been a particular source of weakness.

Germany's manufacturing and export-oriented economy has been hit by higher energy prices and slowing demand in China, a key trade partner.

Germany is the only major economy expected to shrink the year, the International Monetary Fund said in July.

Still, the state of the larger eurozone economy doesn't resemble a typical recession, because unemployment is at record lows and workers are earning more.

rm/nm (Reuters, AP)

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