German economy in recession after GDP falls: Statistics Office

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German economy in recession after GDP falls: Statistics Office | Baaghi TV

BERLIN: Germany has gone into recession after high prices pushed the country’s economy into recession, per GDP figures for the first quarter. 

According to the data released by Germany’s federal statistical office, on Thursday, the GDP (gross domestic product) has fallen by 0.3 percent in the first quarter, similar to the previous three quarters. The revised numbers show that the economy has shrunk for two quarters, after a 0.5 percent drop in the previous months leading to December.

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Estimates released in April indicated Germany “narrowly avoided” a recession. According to Carsten Brzeski, a global head at the Dutch bank, ING, “the German economy actually did this winter what we had feared already since last summer: it fell into a technical recession”.

On the other hand, the statistics office has argued that despite growth in the private sector investment and construction, the progress was offset due to rising living costs forcing German citizens to control expenses. In this regard, the statistics office said that a “persistence of high price increases continued to be a burden on the German economy at the start of the year”.

It is pertinent to mention that the overall household spending has fallen by 1.2 percent in the first quarter. This is because people are not willing to spend on food, clothes, and furniture unless necessary. Likewise, government spending has also experienced a decline of 4.9 percent in comparison to the previous quarter.

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Carsten Brzeski has argued that the overall GDP drop is not the “worst-case scenario of a severe recession” rather it is a “drop of almost 1% from last summer”. Brzeski elaborated that while supply chain frictions were eased by the Chinese reopening, the economy could not be saved from falling into the “recessionary danger zone”.

In the months ahead, Brzeski further warned that a drop in the purchasing power due to weaker industrial sector orders and rising interest rates, as well as slow foreign economic growth across the US, would also likely impact economic activity in Germany.

According to The Guardian reports, Brzeski argued apart from the above issues, the “war in Ukraine, demographic change and the current energy transition will structurally weigh on the German economy in the coming years”.

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