Germany’s Economy Almost Slipped Into A (Two-Quarter) Recession Last Year
“For most of the past decade Germany has been a shining exception to Europe’s economic weakness. But a series of recent figures indicate the mighty Teutons might be in serious trouble…The federal statistics office said last week that German GDP grew by only 1.5% in 2018, compared with 2.2% in 2017, and stated that economic growth “has lost momentum”. Business confidence is flagging. And on January 21st the IMF revised its forecast for German growth to just 1.3% this year, down by 0.6 points from its prediction in October, the biggest downward revision of any major economy. The fund cited weak consumer demand at home and abroad, and the introduction of stricter fuel-emission standards for carmakers that temporarily slowed production.” (The Economist, Jan. 26, 2019)
The global economic slowdown brought Germany’s economy to the brink of a recession in the second half of last year. Germany's economy may have dodged a recession but its economic performance in 2018 was still the weakest in five years, adding to evidence that trade tensions and a sharp slowdown in China are hampering global growth.
The German economy grew 1.5% in 2018 compared to a 2.2% expansion in 2017, its slowest growth rate since the European debt crisis. The economy was hit by a series of external shocks, including trade tensions, turmoil in emerging markets, a temporary spike in oil prices, uncertainty over Brexit and a sharp economic slowdown in China.
The economic outlook for Europe and the world darkened after growth in Germany’s economy slowed sharply last year, hit by weaker exports to China and elsewhere, and softer demand at home. The risks for the global economy, the eurozone and Germany have increased significantly in recent months.
What is more, the major central banks have already recognized the greater risks and have paused in their interest rate hiking normalization path. In Europe, several crises could flare up simultaneously in 2019 and further burden economic development. It's still unclear if Brexit will take place in an orderly or chaotic fashion; and then there is the Italian government's rather adventurous approach to economic policy, which could trigger a new euro crisis.
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Germany’s GDP Growth On A Quarterly Basis
Disclosure: None.