Germany faces dire odds of a recession as the economy weathers the winter and energy crisis better than expected, but it must undergo a transformation to secure its future.

And the national statistics institute Distatis announced last week that the growth of Germany’s gross domestic product in 2022 exceeded expectations by 1.9%, despite a “difficult environment” caused by the war in Ukraine and a strong increase in the prices.

In autumn, the government projected growth of just 1.4% in 2022, after growth of 2.6% in 2021. However, ING banking group analyst Carsten Pejeski warned that the eurozone’s biggest economy “it’s still (pre) recession”.

According to preliminary estimates by the Disstates Institute, a “stagnation” of the gross domestic product (GDP) was observed in the last three months of 2022, allowing to avoid a negative growth pace for now.

Between consumption stability, state aid and energy conservation, Germany remains firm in the face of the crisis, although “the total economic loss is, despite everything, enormous, as expected before the Russian attack on Ukraine”. He highlighted the growth, which was almost double”, explained the economist. Bench KFV Frizi Koehler in Gabe.

temperate climate

“We managed to get this crisis under control… the winter slowdown will be milder and shorter than expected,” said Finance Minister Robert Habek, expressing his satisfaction. The government still expects a 0.4% cut in 2023, but most institutions are less pessimistic.

Ukraine’s war-induced energy crisis has shaken Germany’s economic model, which relies heavily on massive imports of cheap gas from Russia.

The war cut off supplies from Russia, causing prices to rise in Europe for part of the year. And the rate of inflation has risen as production costs in manufacturing, Germany’s engine of growth, stoked fears of a major economic downturn in the country.

In this context, Destatis said that private consumption became the “pillar” of growth last year, with spending returning to pre-COVID-19 levels.

Massive government aid to support purchasing power prevented a collapse in private spending from skyrocketing food and energy prices. As for the industries, they have demonstrated “creative thinking” in saving gasoline, says Jan-Christopher Scherer, an expert at the economic institute DIV.

A study carried out by the Economic Research Institute “EFO” showed that “three quarters” of the industries that use gas have reduced consumption without reducing production. Energy prices have also fallen in recent months, thanks to mild weather this winter and Berlin’s efforts to increase supplies of liquefied natural gas.

On the supply side, the gradual easing of pressure on supply chains in global markets has eased pressure on the export industry. “This positive impact partially offset the effects of the war and high energy prices,” said Bejeski.

Difficult months await us

However, the crisis is not over and Oliver Holtmoller, a researcher at the AVH Institute, said that “the next few months will be difficult”. However, if gas prices have fallen in recent months in short-term contract markets, they will remain even higher than before the crisis.

Of course, Berlin has set aside €200bn to cap electricity and gas prices, allowing prices to be frozen in 2023 and 2024, but that move won’t cover all the losses, especially if prices suddenly rise again. .

Adding to the concern is the fact that the public accounts previously showed a deficit of 101.5 billion euros in 2022, which represents 2.6% of GDP, and is expected to increase to 3.25% this year.

And the Association of German Automobile Manufacturers said the sector would again report sales figures in 2023 “a quarter lower than in 2019” a year before the Covid outbreak.

Likewise, some energy industries, such as the chemical industry, could leave the country, experts warned, after production in these sectors fell 12.9% in November at an annual rate after suffering the effects of the health crisis in 2019.

There are more and more voices calling for the abandonment of these economic sectors, which are not very competitive, and their replacement by more technological industries that consume less energy.