Germany is in recession say economists
Germany is technically in recession, economists said today as Europe’s most powerful economy continues to stagnate.
Gross domestic product shrank by 0.2% in the first quarter, according to official figures released today
The German Federal Statistics Office said the slippage from the previous quarter was due to import growth outpacing exports, an effect that wasn’t balanced out by a small increase in domestic demand.
The economy stagnated in the fourth quarter of last year, but officials put a minus sign before the 0.0% growth figure to indicate that it actually contracted very slightly.
Two consecutive quarters of negative growth is one definition of recession.
The government had in recent weeks predicted minimal growth for the January-March period, and the latest figure surprised many economists who also predicted a slight plus.
“The latest figure is a big surprise and clearly a disappointment,” economists at HVB bank in Munich wrote in a research note.
“From a purely technical point of view, the German economy is in a recession,” they added, noting the minimal contraction in the fourth quarter.
Slow growth has been an embarrassment to Chancellor Gerhard Schroeder, since the economy isn’t strong enough to create new jobs, and the unemployment rate has ballooned to 10.8%.
The state of the German economy also complicates interest-rate decisions by the European Central Bank, since many economists say that on its own Germany would have cut interest rates to spur growth.
The bank, however, must come up with a one-size-fits-all monetary policy for all 12 countries using the euro currency, and so far has held off cutting rates.
The poor first-quarter performance raises more doubts about growth for this year as a whole, since earlier forecasts already have been torn up.
The government is forecasting 0.75% growth – a figure that was trimmed last month from the 1% it predicted in January.
The International Monetary Fund expects growth of only 0.5% in 2003 and the European Commission 0.4 percent.
Last year’s annual growth was a feeble 0.2%, the German economy’s worst overall performance since 1993.
Compared with the same quarter last year, the economy grew by 0.5% in this year’s first three months.
