NewsGerman economy under strain: high energy costs, property market challenges and imperilled companies blight forecast

German economy under strain: high energy costs, property market challenges and imperilled companies blight forecast

Chancellor of Germany Olaf Scholz
Chancellor of Germany Olaf Scholz
Images source: © PAP | PAP/EPA/SHAWN THEW

11 February 2024 17:27

"The bad news keeps on coming. After the economy shrunk in the last quarter of last year, preliminary surveys for 2024 reveal no break in sight for us," reports Bloomberg.

"Germany is indeed in strife," said Brian Mangwiro, a fund manager at Barings, as quoted by the agency.

"All main manufacturing economies are decelerating, but this is more pronounced in Germany due to higher energy costs. The automotive sector is also confronting challenges in competition with China," he continued.

Germany is grappling with industry problems

Germany's industrial production fell by 1.6 percent month-on-month in December. Experts had anticipated far more favourable numbers – negative, but only at -0.4 percent. The previous measurement was also considerably better, recorded at -0.2 percent.

This data suggests that German firms have sharply curtailed industrial production. This marks the fourth sequential downturn, and the most severe since March 2023.

Mid-January brought us information regarding Germany's GDP. Germany's Gross Domestic Product decreased by 0.3 percent in 2023.

As per the data gathered by Bloomberg News, companies faced difficulty in repaying or settling loans and bonds worth more than £10.3 billion.

As reported by the agency, a study by the consulting firm Alvarez & Marsal reveals that approximately 15 percent of firms in Germany are currently struggling, which "represents the highest percentage in Europe".

German budget ratified

The ratified budget allows for outlays of approximately £357 billion (originally 477 billion euros) and fresh debt of £29.2 billion (originally 39 billion euros). 388 members voted in favour of passing the budget on Friday, and 279 were against, says the ARD television station.

Originally, the budget was supposed to be ratified in December 2023. A ruling by the Federal Constitutional Court, however, disrupted the coalition government's plans, which was forced to bridge billion-pound gaps in a short timeframe.