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Recession, stagnation loom, say experts

By EARLE GALE in London | China Daily Global | Updated: 2023-11-10 09:29

In this file photo taken on Feb 23, 2022 cars are transported on a freight train at a depot in Mannheim, southwestern Germany. [Photo/Agencies]

Germany's economy will shrink by 0.4 percent this year and remain effectively stagnant throughout 2024, according to a panel of experts known colloquially as the "economic sages".

The five-person panel, which is officially called the German Council of Economic Experts, said in its annual report released this week that the country is headed for a recession in 2023, and can only hope for a mild recovery in 2024.

"Germany has recorded the lowest growth of all economies in the euro area since the beginning of the coronavirus pandemic," they wrote, saying the situation would have been even worse, if not for the government's "extensive economic policy measures to convert the energy supply and to cushion the economic effects of the energy crisis".

The report was more gloomy than the independent panel's interim report in March, in which the experts said Germany would likely narrowly avoid recession in 2023.

The experts said in the latest report that there will likely be a 0.7 percent expansion of gross domestic product, or GDP, in 2024.

They said Germany had fared poorly, economically, compared to other nations in the eurozone because its massive industrial sector has been especially susceptible to the sharp hikes in the cost of energy that followed the start of the Russia-Ukraine conflict.

The economic sages said Germany's economy has also been dented by a fall in demand domestically, and by diminished demand in some of its key overseas markets.

The report called on the government to help the economy by encouraging antiquated enterprises to modernize, especially through digitization, and by solving labor shortages that will be exacerbated by the country's aging workforce. And the experts said Germany should also seek to attract more private capital investment from other European countries.

The predictions were in line with several other recent reports on the state of Germany's economy, and similar to one from the nation's government for 2023, although the government prediction differs in that it anticipates an economic recovery next year, with GDP growing by 1.3 percent.

Monika Schnitzer, who chairs the German Council of Economic Experts, told the Associated Press news agency: "The economic recovery in Germany is delayed. It is ... still being slowed by the energy crisis and reduced real income caused by inflation."

She said high interest rates that make borrowing expensive have added to the country's problems.

Ulrike Malmendier, a member of the panel, told the European news website Euractiv that European nations have actually begun to invest more in Germany, but that more inward investment is needed.

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