Germany is in recession

The Straits Times
Nov 25, 2008 | 4:22 PM
Germany is in recession

FRANKFURT - THE German economy is in recession with the world's leading exporter falling victim to the global financial crisis, final figures from national statistics service Destatis showed on Tuesday.

Europe's biggest economy contracted by 0.5 per cent in the third quarter, more than expected, following a contraction of a revised 0.4 per cent in the second quarter, meeting the technical definition for a recession of consecutive quarterly negative growth.

The figure released on Tuesday matched Destatis' preliminary number for gross domestic product (GDP) provided on Nov 13.

Although Destatis noted slight improvement in domestic demand, that 'was counteracted by a highly negative trend of net exports,' it said.

The world's leading exporter has been hit by weakening activity in its major markets while domestic consumption has remained at low levels.

Corporate investment has suffered in turn from a sharp decline in business confidence.

A panel of top economists that advised the government has warned that growth would come to a halt next year, and estimated that economic activity would expand this year by 1.7 per cent.

UniCredit Markets chief German economist Andreas Rees commented that 'the latest GDP components offered a bitter foretaste of what lies ahead for German companies and consumers alike in 2009.

He expected the German recession to last until mid 2009.

'Moreover, we do not want to put lipstick on a pig,' Mr Rees added.

'There is no upside, but a lot of downside risk to our forecast. Accordingly, we expect the German economy to shrink 0.9 per cent (or more) in 2009 which would be the worst performance since the 1950s.' -- AFP