Germany, Europe’s largest economy, has entered recession

Bad news for Olaf Scholz. Germany, the largest European economy, entered recession in the first quarter, after a second consecutive decline in economic activity in a context of high inflation and rising interest rates. Gross domestic product (GDP) fell 0.3% between January and March 2023, after falling 0.5% between October and December 2022, according to the national statistics institute.

This is a recession in the technical sense, that is to say two quarters of decline in a row. This is a first since the Covid-19 pandemic which caused a drop in German GDP in the first and second quarters of 2020. Over one year, the indicator fell by 0.5%. In Belgium and France, on the other hand, economic activity increased by 0.4% and 0.2% respectively in the first quarter of 2023. Italy, for its part, saw its GDP climb by 0.5%.

German industry, long dependent on cheap Russian gas, was hit hard last year after the start of war in Ukraine as Moscow cut off supplies to Germany and pushed prices up. Despite this slowdown, the German government still expects a gradual recovery in activity over the course of the year, with a full-year growth of 0.4% in 2023.