German Economy Grows 1.90% In 2022 To Beat Expectations. Can It Avoid Recession?
13 Gennaio 2023 - 06:01AM
Germany's gross domestic product growth slowed less than
expected in the year 2022, driven mainly by private consumption and
investment in machinery, and returned to pre-pandemic levels.
Despite the better performance, economists continue to look forward
to a mild recession in the biggest euro area economy this year.
GDP grew a price-adjusted 1.90 percent in 2022, which was slower
than the 2.60 percent expansion in the previous year, preliminary
data from Destatis showed Friday. Economists had forecast 1.8
The German economy expanded for a second year in a row after a
3.7 percent contraction in 2020, when the Covid-19 pandemic
severely hurt growth across the world. In 2019, the economy grew
1.1 percent. "The overall economic situation in Germany in 2022 was
characterized by the consequences of the war in Ukraine such as the
extreme increases in energy prices," said Ruth Brand, new president
of the Federal Statistical Office/Destatis, said. Brand became the
Destatis chief on January 1, 2023.
"In addition, there were aggravated material and delivery
bottlenecks, massively increasing prices for food, for example, as
well as the shortage of skilled workers and the ongoing corona
pandemic, albeit easing over the course of the year."
"Despite these persistently difficult conditions, the German
economy was able to hold its ground overall in 2022," Brand
Compared to 2019, the year before the start of the corona
pandemic, GDP in 2022 was 0.7 percent higher, Destatis said.
The sheer fact that the German economy avoided the worst,
unfortunately, does not mean that all of the economic problems have
disappeared, ING economist Carsten Brzeski said, adding that the
firm remains doubtful if the leading Eurozone economy would indeed
avoid the much-predicted recession.
The German economy now faces a host of issues such as energy
supply in the winter of 2023/24, changing global trade with more
geopolitical risks and changes to supply chains, high investment
needs for digitalisation and infrastructure and an increasing lack
of skilled workers, Brzeski said. The economist expects these to
weigh on growth this year.
Commerzbank Chief Economist Jorg Kramer predicted a mild
recession with a 0.5 percent decline in real GDP for 2023, citing
significant interest rate hikes by the central banks in the Western
world. Another argument the economist put forward is that the
German government's relief packages cannot be targeted so precisely
that every private household and every company is largely relieved
of the consequences of high energy costs.
On a price and calendar-adjusted basis, the economy grew 2.0
percent in 2022, following a 2.6 percent growth in the previous
While the service sectors benefited from catch-up effects, high
prices and a shortage of materials slowed down industrial
production and construction, the statistical office said.
Private consumption grew 4.6 percent year-on-year, thus almost
reached the pre-crisis level of 2019, Destatis said, thanks to the
catch-up effects in the course of the lifting of almost all corona
protection measures in spring 2022.
Construction investments shrank 1.6 percent, while outlay in
machinery equipment and vehicles grew 2.5 percent.
Meanwhile, the trade balance damped GDP growth overall as the
growth in imports exceeded that in exports. Exports grew 3.2
percent, while imports increased 6.7 percent.
Employment grew 1.3 percent or by 589,000 persons year-on-year
to a record 45.6 million in 2022.
State budgets ended the year 2022 with a financing deficit of
EUR 101.6 billion, which was nearly EUR 33 billion less than in
2021, when it was EUR 134.3 billion.
The relief in the state budget from the expiring corona measures
was overshadowed by new burdens from the energy crisis resulting
from the Russian war of aggression in Ukraine, Destatis said.
Government support measures including the three relief packages
to help reduce the energy cost burden of households and businesses
boosted government spending.
The federal deficit totaled EUR 117.6 billion in 2022, which was
lower than the EUR 145.9 billion in the previous year.
The deficit to GDP ratio was 2.6 percent versus 3.7 percent in
2021. In 2020, it was 4.3 percent, while there was a surplus of 1.5
percent in the pre-pandemic year 2019.
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