Europe’s biggest economy shrank last year

Germany’s economy shrank last year for the first time since the onset of the Covid-19 pandemic, official data showed Monday, increasing the risk of an economic contraction in the wider euro area.

Gross domestic product was 0.3% lower in 2023 than in the previous year, according to Germany’s Federal Statistical Office (Destatis).

“Overall economic development faltered in Germany in 2023 in an environment that continues to be marked by multiple crises,” Destatis president Ruth Brand said in a statement.

Although inflation has eased, prices remain high throughout the economy and have put a damper on economic growth, Brand added. “Rising interest rates and weaker domestic and foreign demand also took their toll.”

The data bodes ill for the entire area that uses the euro because Germany is the largest of its 20 economies. Output in the euro area shrank slightly in the third quarter of 2023. Figures for the final quarter, expected on January 30, will confirm whether the region slipped into recession toward the end of the year, defined as two consecutive quarters of falling GDP.