The country has borne the brunt of a weakening global economy due to its dependence on exports, the chancellor has said
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Germany’s current economic growth is “unsatisfactory,” Chancellor Olaf Scholz has said in an interview with Bavarian newspaper Passauer Neue Presse, published on Saturday.
According to Scholz, Germany’s reliance on exports means it has been markedly affected by the overall slump in the world’s economy.
“When the global economy weakens, we feel it particularly strongly. But the reverse also applies: if the global economy picks up again, we also benefit,” he stated.
The chancellor, however, is optimistic about long-term prospects. He said that Germany has “the best pre-requisites to ensure we’ll still be playing in the top league technologically in ten, 20 and in 30 years’ time.” He also rejected calls for higher debt-financed federal spending to boost economic growth.
“I’m not sure that the [EU] actually thinks we should take on more debt,” he stated, noting that Germany’s debt is already inflated due to its efforts to ease the consequences of the Covid-19 pandemic and, more recently, to stem the effect of Ukraine-related sanctions on Russia, which led to a spike in energy prices.
Despite remaining the EU’s largest economy, Germany has been struggling with the fallout from the energy crisis and persistently high inflation since last year. The country was among the hardest hit by the reduction in Russian energy deliveries after the EU imposed sanctions on Moscow in response to the conflict in Ukraine. This resulted in elevated energy costs, which in turn have been driving up prices in other sectors of the economy.
According to the country’s Federal Statistical Office (Destatis), the German budget deficit surged to €42.1 billion ($45.4 billion) in the first half of 2023 amid Berlin’s efforts to rein in inflation and energy prices. The country’s industrial production has been down for months, and has been forecast to shrink further this year. The economy has stagnated at zero growth in the second quarter of the year, barely managing to exit a technical recession what lasted the previous two quarters. Analysts warn that, given the current economic indicators, Germany’s economy is likely to contract again in the second half of the year.
“For the third quarter, the overall signs are pointing to contraction again. In all probability, a negative result for GDP growth will be recorded for 2023 as a whole,” Jens-Oliver Niklasch, an economist at Landesbank Baden-Wuerttemberg, told the AFP news agency.
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