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Why Is The German Economy Shrinking?

why is the german economy shrinking?

A self-criticism came from Germany, which updated its economic forecasts for this year based on last year’s data. Accordingly, the contraction of the German economy in the fourth quarter exceeded forecasts, and a debate has begun about the reasons for this situation.

Is Fixed Capital The Only Reason?

The German economy contracted by 0.4% at the end of 2022, exceeding forecasts, due to a decline in fixed capital investment and private consumption. Although an explanation has been given, there seems to be a widespread view that fixed capital investment is not the only reason. But what happened?
The German economy contracted by 0.4 percent at the end of 2022, exceeding forecasts. Earlier forecasts for German economic output had assumed a decline of 0.2 percent.
According to the Federal Statistical Office, the main reason for the contraction was a decline in private investment and consumption, while government spending had a positive effect.

why is the german economy shrinking?

The German Economy Is Very Strong

In particular, many experts continue to agree that confidence in the German economy is growing. It is also certain that the economy will continue to grow in the long term once the gas and energy problems have been overcome.
Growth prospects are therefore forecast to rise until 2024, when some problems will actually have been resolved. Economists also expected negative growth this quarter, which would plunge the country into recession.

Russia Has Changed Its Expectations

An unusually mild winter, however, has distracted Germans from the gloomy outlook that had raised concerns following Russia’s invasion of Ukraine.
Ifo and ZEW expectations indexes released earlier this week exceeded forecasts and bolstered optimism about the resilience of the German economy.
According to the surveys of purchasing managers, private sector activity is expected to recover after more than six months of unfavorable statistics, supply chains are likely to loosen and the services sector is expected to improve.

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