German economy expected to avoid recession in 2023
Last updated on: 30 January,2023 08:29 am
Industrial powerhouse Germany is forecast to eke out growth of 0.2 percent this year
FRANKFURT (AFP) - Germany is set to narrowly escape a recession this year, the government said Wednesday, as Europe’s biggest economy weathers the fallout from the Ukraine war better than expected.
Industrial powerhouse Germany is forecast to eke out growth of 0.2 percent in 2023, the economy ministry said in its latest projections.
Back in October, when fears were running high about soaring energy costs in the wake of Russia’s war in Ukraine, Berlin was bracing for a contraction of 0.4 percent in 2023.
“The government has fended off the economic crisis,” Chancellor Olaf Scholz told lawmakers in Berlin. “We have shown what we are capable of.”
Massive government intervention has helped keep the lid on energy costs for households and businesses after Russia cut deliveries of natural gas last year.
As well as criss-crossing the globe to find alternative suppliers, the German government has unveiled a 200-billion-euro ($212-billion) support package to cushion the energy crisis, including a cap on electricity and gas prices.
Mild winter weather and falling wholesale gas prices recently have further bolstered confidence that the expected downturn will not be as painful as initially thought.
“The German economy as a whole has proved resilient,” the ministry said in its annual report.
“Consumers have also done their part by making major energy savings.”
The German economy already defied predictions by dodging a contraction in the final quarter of 2022, official data showed last week.
Over the whole of 2022 output expanded by 1.9 percent, the data showed, better than analysts had predicted.
Lower energy prices have also helped bring down inflation from a peak of 10.4 percent in October, and the economy ministry expects the trend to continue.
For 2023, consumer price growth is now tipped to reach six percent, down from an earlier estimate of seven percent. But Europe’s top economy is not out of the woods yet, analysts said.