Germany economy to deteriorate further

Business groups in Germany have urged the government to focus on the economy after new figures showed it has stagnated, and as the International Monetary Fund, or IMF, predicted it could deteriorate further.

After Germany's Federal Statistics Office reported on Friday that the nation's economic output stagnated during the April-to-June quarter, the IMF said it now expects Germany's Gross Domestic Product, or GDP, to shrink by 0.3 percent this year, after having grown by 1.8 percent in 2022.

The British newspaper The Daily Telegraph said Germany could now be facing a "prolonged downturn".

Claus Vistesen, of Pantheon Macroeconomics, told the paper Germany's economy looks set to now lag for a while behind the rest of Europe.

"Germany is really, really weak here," he said. "We are looking into a prolonged slowdown. Unless something really dramatic happens, Germany's GDP is going to fall outright this year. That is pretty bad."

The Reuters news agency noted that the stagnation of the industrial powerhouse's economy in the second quarter was unexpected, with most experts having predicted modest growth.

At the same time as the stagnation in Germany, France saw growth of 0.5 percent and Spain recorded growth of 0.4 percent.

Germany's economic output had also been poor in the first quarter of 2023, when it fell by 0.1 percent, and in final quarter of 2022, when it dropped by 0.4 percent.

The nation's economy, which is Europe's largest, has struggled more than most because it relied heavily in the past on fossil fuels that it imported from Russia and Ukraine. The cost of such fuel has shot up since the start of the Russia-Ukraine conflict.

Germany has also struggled with high borrowing costs that have resulted from central banks raising interest rates to try to cool inflation. It has also been hit by weak global purchasing power and depleted factory order books.

The IMF said it now expects Germany to be the world's only heavyweight economy to have a shrinking economic landscape this year, and that it looks set to become the world's worst-performing major economy.

Germany's Economy Minister Robert Habeck said there are now signs that consumers are starting to have more money in their pockets, which should mean consumption will start to increase.

"There are indeed slightly positive trends in private consumption and investment, but that is not enough, and the figures are anything but satisfactory," he said.

But Habeck responded to calls for more fiscal assistance for businesses by saying an economic stimulus package would do more harm than good.

"Whoever distributes money with a watering can in times of high inflation only brings one thing to growth: inflation," Reuters quoted him as saying.