April 18, 2021

Germany avoids the recession by the minimum to stagnate in the fourth quarter of 2018 | Economy

Germany avoids the recession by the minimum to stagnate in the fourth quarter of 2018 | Economy

The ghost of the recession has moved away by the minimum of Germany after knowing this morning the figures of the fourth quarter published by the German Federal Statistics Office in Wiesbaden. GDP growth stagnated by 0.0%, thus technically avoiding recession, after registering a period of negative growth between July and September last year (-0.2%). These figures, however, represent a clear setback with respect to the same period of the previous year and also compared with the first six months of 2018.

The data also indicate that the German economy grew a little less last year than initially estimated. The Gross Domestic Product (GDP) increased by 1.4%, compared to the 1.5% calculated so far.

The German statistical office details that the stabilization of the last quarter is due to a growth especially of the internal demand, mainly in the sector of the construction and the machinery. Consumption grew, while foreign trade did not contribute to the slight improvement.

The forecasts and indicators of recent months reflect a slowdown in the European locomotive after almost a decade of economic strength. The global uncertainty resulting from commercial tensions, transatlantic shocks and the uncertainties posed by the Brexit affect with particular intensity an economy such as Germany, which relies heavily on exports.

"The slowdown is due to the fall in industrial production, because Germany is an economy focused on exports. The peak of business was reached in early 2018. Since then, there has been a cooling and orders have fallen to the factories. Uncertainty among entrepreneurs is huge, "explains Timo Wollmershaeuser, vice director of macroeconomics at Ifo, the Institute for economic research in Munich.

Wollmershaeuser explains that the data also reflects a division of the German economy. That while the industry is stagnating, domestic demand, construction and all kinds of services continue to grow. "The global economy is getting cold and so are our great business partners. Therefore, the figures for this year will be worse than expected, we will grow below 1%, "predicts the expert, who alludes to the economic turmoil in China and the European Union.

The German Executive has revised downwards the growth forecasts for this year, amounting to 1% of GDP compared to the initially expected 1.8%. Brussels corrected its forecasts for 2019 in the euro zone at the beginning of February, from 1.9% to 1.3%, foreseeing that the slowdown will continue. Industrial production, for example, registered a fall of 0.4% in December, which represents a decrease for the fourth consecutive month.


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