Germany’s economy suffers steep decline

GERMANY is on the brink of a recession after its economy declined more steeply than expected last year, while Britain seems poised to narrowly avoid one in defiance of international predictions.

Official figures show the German economy shrank by 0.4pc in the final three months of last year, faring worse than feared after an initial estimate had put the drop at 0.2pc. The economy will enter recession if it suffers another contraction in the first quarter of 2023.

It came as BASF, the German chemicals maker, announced 2,600 job cuts in the wake of surging energy prices and an annual loss triggered by the exit of its oil and gas division from Russia.

The company, based in Ludwigshafen, vowed to generate savings of €500m (£440m) in its service, operating and research divisions and corporate headquarters.

Meanwhile, an uptick in consumer confidence and falling wholesale energy prices suggest Britain may escape without a recessionary period – in defiance of predictions from the Bank of England and IMF, which suggested that the UK would be the only G7 nation to contract this year.

Xuxin Mao, of the National Institute of Economic and Social Research, said: “The UK is proving to be the lucky one and is likely to narrowly avoid a recession with a small positive GDP growth number, while the German economy is going to have a small negative growth rate this year.”

He said the IMF’S pessi- mistic prediction seemed to have impacted expectations for the UK and that forecasts may have some “fine-tuning” to do. Many other forecasters still believe Britain will enter a recession, albeit a smaller and shorter one than previously thought.

In Germany, demand fell across the board in the final quarter of 2022. Only government consumption and inventories prevented an even steeper economic drop. Although gas prices have fallen rapidly, economists say that the energy crisis and high inflation are the country into retreat.