The German economy is in a double crisis: Germany has slipped into a short-term recession. Economic output is likely to shrink throughout 2023.
But the longer-term outlook is more dangerous: Germany’s growth potential is dwindling. There is a shortage of workers and productivity falls. Germany is threatened with a long stagnation.
Here are the reasons and facts why the prospects are not good at the moment – and what still gives hope. With many graphics and tables that make this crisis understandable.
The news from the German economy could hardly be much worse. Germany had already slipped into a recession at the beginning of the year. In view of the shocks of the Ukraine war, this only “mild recession” actually seemed more of a success at first. But now it is threatening to become a permanent crisis – and this twice, economically and structurally. In the short term, the economy is also likely to contract in 2023 as a whole. The long-term prospects are bleak, too. Germany’s growth potential is dwindling – for a number of reasons.
The current situation: all bad news
Germany has officially been in a recession since the beginning of the year. Economic output, measured in terms of gross domestic product (GDP), fell for two consecutive quarters: by 0.5 percent at the end of 2022 and by another 0.3 percent at the beginning of 2023.