Germany's Economy Shrinks 0.3% in Q4 Last Year

Significant Contraction in Construction, Machinery, and Equipment Sectors

Germany's economy contracted in the last quarter, with the construction, machinery, and equipment sectors experiencing significant shrinkage.

Industrial area in Frankfurt, Germany.
[Image source=Yonhap News]

Germany's Federal Statistical Office announced on the 30th (local time) that the country's gross domestic product (GDP) in the fourth quarter of last year decreased by 0.3% compared to the previous quarter. In the first quarter of last year, Germany's economy grew by only 0.1%, and in the second and third quarters, the GDP growth rate remained flat at 0.0%. The preliminary annual GDP growth rate for last year was also recorded at minus 0.3%.

The German economy has struggled to recover from the energy crisis fallout caused by the war in Ukraine.

The Ifo Business Climate Index, which quantifies German companies' future economic outlook, fell further from 86.3 in December last year to 85.2 this month. The Ifo Institute forecasts that Germany's economy will contract by 0.2% in the first quarter of this year as well.

Adverse factors continue to mount, including austerity measures following last year's Constitutional Court ruling declaring the budget unconstitutional, a five-day railway strike that ended on the 28th, and supply chain instability in the Red Sea.

The economic newspaper Handelsblatt analyzed, "Since the Constitutional Court ruling, the federal government's fiscal management has been restricted, making it difficult to expect large-scale stimulus measures," adding, "As economic expansion is delayed, the long-term growth potential of Germany's economy is increasingly likely to decline."

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