Germany is currently facing yet another period of economic contraction, according to the latest report from the Bundesbank. The country has been grappling with challenges such as high energy costs and supply chain disruptions, which have contributed to its status as one of Europe’s weakest economies. Despite these difficulties, there are signs of potential recovery on the horizon for 2024.
The Bundesbank’s forecast indicates that Germany’s economy will continue to struggle in the final quarter of 2023, extending an industrial downturn that has been exacerbated by factors such as the war in Ukraine, rising energy prices, and increasing interest rates. Out of all the quarters this year, only one has experienced growth, highlighting the severity of the economic challenges.
However, there is hope for 2024 as the Bundesbank notes solid employment figures and potential wage increases that could support an eventual upturn. Additionally, there are tentative signs of recovery in foreign demand and an expected boost in real consumption from higher net incomes. These positive factors provide some optimism for the future.
Despite these potential drivers, 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 economic report also mentioned that the exchange rate has remained stable post-publication, with EUR/USD trading at 1.0930.