Germany's economy shrank by 0.3% in 2023, the federal statistics agency Destatis said on Monday.

The announcement comes after months of persistent inflation as well as sluggish demand both locally and globally.

"Overall economic development faltered in Germany in 2023 in an environment that continues to be marked by multiple crises," Destatis head Ruth Brand said in Berlin.

Some sectors that have struggled include the automotive industry and the construction industry.

Germany avoids recession after figures revised

In preliminary figures, Destatis also calculated that Germany saw a 0.3% drop in gross domestic product (GDP) in the fourth quarter of 2023.

However, Germany avoided falling into a technical recession of two successive quarters of negative growth.

That's because in Monday's announcement, Destatis revised the third quarter calculations from a 0.1% contraction to a stagnation.

The International Monetary Fund (IMF) previously predicted that Germany would be the only major world economy to record a decline for 2023.

'Silver lining' predicted for 2024

A weak recovery is predicted next year. Germany's Bundesbank central bank recently forecasted growth of 0.4%.

"We see a silver lining for the economy in 2024," said  Fritzi Koehler-Geib, chief economist at Germany's national development bank KfW.

"Thanks to strong real wage growth, private consumption in particular is likely to pick up again. Together with an expected recovery in export demand, gross domestic product is likely to grow," she added.

"Inflation is expected to return to an annual average of around 2%. This means that the landing after the period of high inflation will probably be quite soft in Germany too."

zc/lo (dpa, AP, Reuters, AFP)

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