Germany's economy contracted in the third quarter, putting the country on track for a recession. Figures published by the German Federal Statistical Office on Monday showed the economy had shrunk by 0.1 percent in the third fiscal quarter, blaming the decline on reduced housing spending. But that drop in gross domestic product (GDP) was smaller than the 0.2 percent previously predicted, following zero growth in the first quarter of 2023 and just 0.1 percent in the second.
The International Monetary Fund has predicted that Germany will be the only major economy to fall into recession this year.
Germany's industrial base has suffered badly from soaring energy prices — caused by Western sanctions on Russia. Interest rate hikes aimed at controlling the 4.5 percent inflation rate have also dampened consumer demand, cutting profits further. Chemical firm Lanxess recently announced plans to lay off seven percent of its 14,000 workforce, while car giant Volkswagen will seek more savings on top of those already imposed.
Some economists have predicted that Germany will not see a return to economic growth until 2024.
Germany has also had to cough up for the conflict in Ukraine, providing hundreds of tanks and other armored vehicles, artillery and air defense systems to the Kiev regime. Defense spending rose from 1.2 percent of GDP in 2018 to 1.4 percent in 2022. The 2024 defense budget has been set at €51.8 billion ($54.7 billion), €1.7 billion ($1.8 billion) higher than this year's.