The German economy stalled in the final quarter of last year, narrowly escaping recession, as the fallout from global trade disputes and Brexit threatened to derail a decade-long expansion in Europe’s economic powerhouse.
The GDP of Europe’s biggest economy was unchanged for the quarter, the German Federal Statistics Office said yesterday.
A Reuters poll had forecast growth of 0.1 percent.
German companies are grappling with a cooling global economy and trade disputes triggered by US President Donald Trump’s policies. It also faces the risk that the UK would leave the EU next month without an agreement on the terms of its withdrawal.
“Germany got away with a black eye,” DekaBank economist Andreas Scheuerle said of the fourth-quarter numbers. “But the first quarter is not looking like it is going to be easy, either, as political uncertainties are weighing heavily on corporate confidence.”
With growth unchanged in the fourth quarter, the economy escaped recession — defined as two or more consecutive quarters of contraction — after it shrank by 0.2 percent in the third quarter.
Germany’s economy last year grew at its weakest rate in five years. Growth is forecast to shrink further to 1 percent this year and the country faces a budget shortfall of about 25 billion euros by 2023.
The fallout from the trade disputes and concern about Brexit are weighing on business confidence, which fell for the fifth consecutive month last month.
Morale is also being depressed by weaker demand for German goods and services in China, the eurozone and emerging markets.
Furthermore, the government is concerned that technological innovation and the acquisition of German industrial know-how by foreign — particularly Chinese — companies could erode the manufacturing base on which much of Germany’s wealth is built.
The German government might take stakes in key domestic companies to prevent foreign takeovers, German Federal Minister for Economic Affairs and Energy Peter Altmaier said last week, adding that the shift in policy is needed to safeguard the country’s prosperity.
Presenting an unusually gloomy outlook for Europe’s biggest economy, Bundesbank President Jens Weidmann late last month said that the economic slump would last longer than had been expected and that more bad news was coming.
With German growth stalling, the European Central Bank is likely put off plans to normalize monetary policy any further and it is more likely to provide further stimulus, economists said.
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