Bundesbank Forecasts Germany’s Economy to Shrink in Q4

Germany is currently facing the possibility of another economic contraction, according to a report from the Bundesbank. Despite being one of the weakest economies in Europe, the country is grappling with high energy costs and supply chain disruptions. However, early indications suggest a potential recovery in the coming year.

The latest forecast from the Bundesbank indicates that Germany’s economy will continue to struggle in the final quarter of 2023. This period extends an industrial downturn that has been exacerbated by the ongoing conflict in Ukraine, rising energy prices, and increasing interest rates. Out of all quarters this year, only one has experienced growth, reflecting the severity of the economic headwinds.

Despite these challenges, there is hope for 2024. The Bundesbank notes solid employment figures and wage increases that could eventually lead to an upturn. Tentative signs of recovery in foreign demand and an anticipated boost in real consumption from higher net incomes are among the positive factors cited.

However, there is still no definitive sign of a rebound in global industrial activity as new orders continue to decline and overall demand remains weak. The report also mentions that the exchange rate has remained stable post-publication, with EUR/USD trading at 1.0930.