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Bundesbank considers scope of German recession ‘uncertain’

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Production plans and export expectations of companies in the industrial sector are “pessimistic” in the short term, the Bundesbank notes.

JAVIER LIZON/EPA

Production plans and export expectations of companies in the industrial sector are “pessimistic” in the short term, the Bundesbank notes.

JAVIER LIZON/EPA

The Bundesbank, Germany’s central bank, considers the scale of the recession in the German economy in the fourth quarter of this year and the first quarter of 2023 to be “uncertain”, it was announced this Wednesday.

In the published November bulletin, Bundesbank economists warn that “Uncertainty about energy supply and energy costs is a heavy burden for companies” and that the German economy could contract significantly during the winter term.

Most companies view energy and raw material prices as a risk to their business in the coming months.

According to the Bundesbank, production plans and export expectations of companies in the industrial sector in the short term are “pessimistic”.

“A weakening global economy could weigh on exports, even as high order volumes and reduced supply bottlenecks in the industry dampen demand,” Bundesbank economists said in a monthly report.

In addition, they note that high inflation reduces private consumption and demand for consumer services.

That’s why The Bundesbank predicts a recession in the German economy in the last quarter of 2022 and in the first quarter of 2023although growth in the third quarter of this year was higher than expected, amounting to 0.3% compared with the previous quarter.

As for this predictable recession, economists say its magnitude is “uncertain.”

Gas shortage situations can probably be avoided, but the condition is to save enough gas, which depends on the recorded temperatures, in the case of households.

According to the Bundesbank, if there is a shortage of gas, the reduction in Germany’s gross domestic product (GDP) will be greater.

Source: Observador

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