It Looks Like Germany Might’ve Dodged A Recession

It Looks Like Germany Might’ve Dodged A Recession

11 months ago2 mins

Reports out on Wednesday suggested Germany might just have dodged a recession.

What does this mean?

When Russia first invaded Ukraine, Germany seemed all but destined for a recession – you know, those pesky back-to-back quarters of negative growth. So after the economy shrank 0.4% at the end of last year, the first quarter of 2023 was always going to be pivotal. The verdict: if Germany’s top forecasters are worth their weight in bratwurst, the country may actually have sidestepped a recession, with the economy growing an estimated 0.1% last quarter. That would mean the country’s managed to weather the energy crisis, reducing its reliance on Russian natural gas and softening the impact of higher energy prices on households. No wonder the economy’s looking up, then: instead of a 0.4% drop this year, economists now see 0.3% growth in the cards for Germany.

Germany might avoid recession

Why should I care?

Zooming in: Lucky streak.

That wasn’t the only bit of good news Germany got this week. Factory orders rose by 4.8% in February, crushing expectations of a measly 0.3% increase – a good sign given how crucial manufacturing is to the nation. And German exports outstripped expectations too, with a 4% uptick in February – while business confidence climbed for the fifth consecutive month in March. And sure, enduring demand might slow down inflation's retreat, but for now, that's a small price to pay to fend off a recession.

Germany business confidence

The bigger picture: It’s a win-win-win.

It isn't just a win for Germans if their economy is getting back on track: it's a victory for the entire world. See, the country is Europe's biggest economy, and its success could help stave off a recession for the whole bloc. And as a major investor in other nations, a thriving Germany bodes well for foreign investment and trade to boot. And that’s not to mention that Germans’ famous gift for tech innovation – especially in engineering – could help drive progress in key sectors worldwide.

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