The German economy shrank slightly in 2023, official data showed Monday, as costly energy, high interest rates and cooling foreign demand took their toll on Europe's export giant.

Output contracted by 0.3 per cent year-on-year, federal statistics agency Destatis said in preliminary figures.&nbsp;

"Overall economic development faltered in&nbsp;Germany&nbsp;in 2023 in an environment that continues to be marked by multiple crises,"&nbsp;the agency's Ruth Brand told a Berlin press conference.&nbsp;

Europe's largest economy likely saw a 0.3-per cent drop in gross domestic output in the final quarter of the year, the agency calculated, again in preliminary figures.&nbsp;

It also revised the data for the third quarter from a 0.1-per cent contraction to a stagnation, meaning&nbsp;Germany&nbsp;avoided a year-end technical recession of two successive quarters of negative growth.&nbsp;

The German economy has faced severe headwinds since Russia's war in Ukraine sent inflation, particularly the cost of energy&nbsp;soaring.&nbsp;

The price spikes contributed to a steep downturn in&nbsp;Germany's energy-hungry manufacturing sector, while the construction sector also took a hit.

Increasing competition from China, once a reliable destination for "made in&nbsp;Germany" goods, as well as aggressive eurozone rate hikes to tame inflation further added to&nbsp;Germany's woes.&nbsp;

The limp economic performance was widely expected, with the International Monetary Fund predicting that&nbsp;Germany&nbsp;would be the only major advanced economy not to grow in 2023.&nbsp;

If confirmed in the final figures, the 2023 contraction makes it&nbsp;Germany's weakest year since the coronavirus pandemic battered the economy in 2020.

"Despite recent price declines, prices remained high at all stages in the economic process and put a damper on economic growth" in 2023, said Brand.&nbsp;

"Unfavourable financing conditions due to rising interest rates and weaker domestic and foreign demand also took their toll."

Uncertain outlook&nbsp;

A modest recovery is expected to get under way in 2024, with&nbsp;Germany's Bundesbank central bank recently forecasting growth of 0.4 per cent.

"We see a silver lining for the economy in 2024," said KfW chief economist Fritzi Koehler-Geib.

"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.

But ING bank economist Carsten Brzeski was less optimistic, pointing to fresh uncertainty stemming from the German government's recent budget upset and shipping delays in the Suez Canal as a result of conflict in the Middle East.&nbsp;

"Looking ahead, at least in the first months of 2024, many of the recent drags on growth will still be around and will, in some cases, have an even stronger impact than in 2023," Brzeski said.

He predicted that gross domestic product would shrink again this year, in what would "be the first time since the early 2000s that&nbsp;Germany&nbsp;has gone through a two-year recession, even though it could prove to be a shallow one".

Concerns about slowing exports and the slump in the crucial manufacturing sector, coupled with a chronic shortage of skilled labourers, have begun to raise fears of a "deindustrialisation" in&nbsp;Germany.

Chancellor Olaf Scholz's government, whose popularity has been sliding in the polls, has sought to counter those concerns with pledges to invest heavily in the transition to green energy and in modernising infrastructure.

But a shock court ruling at the end of last year blew a multi-billion-euro hole in the government's budget, upending its spending plans and leaving Scholz and his coalition partners scrambling to find savings.

Anger over Berlin's proposal to cut some subsidies for agriculture prompted farmers to stage tractor blockades across the country last week, culminating in a major demonstration in Berlin on Monday.

The German economy shrank slightly in 2023, official data showed Monday, as costly energy, high interest rates and cooling foreign demand took their toll on Europe's export giant.

The German economy shrank slightly in 2023, official data showed Monday, as costly energy, high interest rates and cooling foreign demand took their toll on Europe's export giant. Output contracted by 0.3 per cent year-on-year, federal statistics agency Destatis said in preliminary figures. "Overall economic development faltered in Germany in 2023 in an environment that continues to be marked by multiple crises," the agency's Ruth Brand told a Berlin press conference. Europe's largest economy likely saw a 0.3-per cent drop in gross domestic output in the final quarter of the year, the agency calculated, again in preliminary figures. It also revised the data for the third quarter from a 0.1-per cent contraction to a stagnation, meaning Germany avoided a year-end technical recession of two successive quarters of negative growth. The German economy has faced severe headwinds since Russia's war in Ukraine sent inflation, particularly the cost of energy soaring. The price spikes contributed to a steep downturn in Germany's energy-hungry manufacturing sector, while the construction sector also took a hit. Increasing competition from China, once a reliable destination for "made in Germany" goods, as well as aggressive eurozone rate hikes to tame inflation further added to Germany's woes. The limp economic performance was widely expected, with the International Monetary Fund predicting that Germany would be the only major advanced economy not to grow in 2023. If confirmed in the final figures, the 2023 contraction makes it Germany's weakest year since the coronavirus pandemic battered the economy in 2020. "Despite recent price declines, prices remained high at all stages in the economic process and put a damper on economic growth" in 2023, said Brand. "Unfavourable financing conditions due to rising interest rates and weaker domestic and foreign demand also took their toll." Uncertain outlook A modest recovery is expected to get under way in 2024, with Germany's Bundesbank central bank recently forecasting growth of 0.4 per cent. "We see a silver lining for the economy in 2024," said KfW chief economist Fritzi Koehler-Geib. "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. But ING bank economist Carsten Brzeski was less optimistic, pointing to fresh uncertainty stemming from the German government's recent budget upset and shipping delays in the Suez Canal as a result of conflict in the Middle East. "Looking ahead, at least in the first months of 2024, many of the recent drags on growth will still be around and will, in some cases, have an even stronger impact than in 2023," Brzeski said. He predicted that gross domestic product would shrink again this year, in what would "be the first time since the early 2000s that Germany has gone through a two-year recession, even though it could prove to be a shallow one". Concerns about slowing exports and the slump in the crucial manufacturing sector, coupled with a chronic shortage of skilled labourers, have begun to raise fears of a "deindustrialisation" in Germany. Chancellor Olaf Scholz's government, whose popularity has been sliding in the polls, has sought to counter those concerns with pledges to invest heavily in the transition to green energy and in modernising infrastructure. But a shock court ruling at the end of last year blew a multi-billion-euro hole in the government's budget, upending its spending plans and leaving Scholz and his coalition partners scrambling to find savings. Anger over Berlin's proposal to cut some subsidies for agriculture prompted farmers to stage tractor blockades across the country last week, culminating in a major demonstration in Berlin on Monday.

German economy shrank in 2023 amid high energy costs, export woes

At a time when Europe's energy crisis is likely to cause a recession, German unemployment unexpectedly decreased as the continent's largest economy displayed resilience. The Federal Labor Agency reported on Tuesday that there was a 13,000-person decrease in unemployment in December.

World Business Watch: Unexpected drop in German unemployment, rate falls to 5.5%

Germany has no plans to dismantle the Nord Stream 2 gas pipeline, confirmed Bundestag, the German parliament in a <a href="https://dip.bundestag.de/drucksache/auf-die-kleine-anfrage-drucksache-20-3625-gasversorgung-nachfrage-zur-antwort/263947?f.wahlperiode=20&amp;f.typ=Dokument&amp;f.herausgeber_dokumentart=Bundestag-Drucksache&amp;rows=25&amp;sort=verteildatum_ab&amp;pos=19">response</a> dated October 26, 2022. The response came in reply to a question by a far-right Alternative for Germany (AfD) lawmaker.&nbsp;

“The Nord Stream 2 pipeline did not go into operation, so the federal government cannot work towards its termination. There are currently no plans to dismantle the line, particularly the part of the line in German territorial waters,” Germany’s ministry for economic affairs and climate change&nbsp;said.

Russia accounted for a whopping 55 per cent of Germany’s gas imports in 2021, a level that declined to 26 per cent by June 2022, in part due to the reduced flow of gas from Russia in the previously operational Nord Stream 1 pipeline.

Chancellor Olaf Scholz-led country has pledged to replace all Russian energy imports as soon as mid-2024.&nbsp;

€46 billion: The cost of replacing Russian gas for Germany

Germany faces the possibility&nbsp;of facing a €46 billion ($45.4 billion) hit for replacing Russian gas with other alternatives, according to a response by Germany’s economic affairs ministry in the parliament. “The amount of the (expected) costs associated with the substitution of Russian gas depends largely on the development of gas prices. Of particular importance in this connection are the volatile gas prices on the spot market, where parts of the required quantities have to be procured. Against this background, the federal government currently estimates the costs at around 46 billion euros,” it said.&nbsp;

The German economic ministry said that the share of Russian gas will be substituted by higher deliveries from Norway and increasing Liquified Natural Gas (LNG) imports from other countries in Europe. The ministry did not specify the names of other countries.&nbsp;

Other than Russia, Germany currently imports LNG from countries such as the United States, Qatar, Algeria, and countries in Africa.&nbsp;

WATCH |&nbsp;<a href="https://www.wionews.com/videos/putin-to-europe-if-you-want-gas-then-open-nord-stream-2-517019">Putin to Europe: If you want gas then open Nord Stream 2</a>

<div class="ui-state-default" contenteditable="false">
<div class="twitter-block" draggable="false">
<div class="videoWrapper trancodeVideo"><iframe allowfullscreen="" autoplay="1" class="includeVideo" frameborder="0" height="350" src="https://www.wionews.com/videos/putin-to-europe-if-you-want-gas-then-open-nord-stream-2-517019/embed" style="width:100%;max-width:560px;" width="560"></iframe></div>
</div>
<a class="close-mark close-div" href="#" id="jqclosemark">×</a></div>

Russia curtailed gas supplies to Germany and other European nations via Nord Stream 1 pipeline starting June 2022. On September 29, amid intensifying warfare between Russia and Ukraine, the former closed down Nord Stream 1 pipeline indefinitely after a number of leaks were found in it and the parallel pipeline Nord Stream 2.

WATCH WION LIVE HERE

<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="350" loading="”lazy”" src="https://www.wionews.com/live-tv/embed?autoplay=1&amp;mute=1  width=&quot;100%&quot;"></iframe>

Germany has no plans to dismantle the Nord Stream 2 gas pipeline, confirmed Bundestag, the German parliament in a response dated October 26, 2022. The response came in reply to a question by a far-right Alternative for Germany (AfD) lawmaker.

Germany has no plans to dismantle the Nord Stream 2 gas pipeline, confirmed Bundestag, the German parliament in a response dated October 26, 2022. The response came in reply to a question by a far-right Alternative for Germany (AfD) lawmaker. “The Nord Stream 2 pipeline did not go into operation, so the federal government cannot work towards its termination. There are currently no plans to dismantle the line, particularly the part of the line in German territorial waters,” Germany’s ministry for economic affairs and climate change said. Russia accounted for a whopping 55 per cent of Germany’s gas imports in 2021, a level that declined to 26 per cent by June 2022, in part due to the reduced flow of gas from Russia in the previously operational Nord Stream 1 pipeline. Chancellor Olaf Scholz-led country has pledged to replace all Russian energy imports as soon as mid-2024. €46 billion: The cost of replacing Russian gas for Germany Germany faces the possibility of facing a €46 billion ($45.4 billion) hit for replacing Russian gas with other alternatives, according to a response by Germany’s economic affairs ministry in the parliament. “The amount of the (expected) costs associated with the substitution of Russian gas depends largely on the development of gas prices. Of particular importance in this connection are the volatile gas prices on the spot market, where parts of the required quantities have to be procured. Against this background, the federal government currently estimates the costs at around 46 billion euros,” it said. The German economic ministry said that the share of Russian gas will be substituted by higher deliveries from Norway and increasing Liquified Natural Gas (LNG) imports from other countries in Europe. The ministry did not specify the names of other countries. Other than Russia, Germany currently imports LNG from countries such as the United States, Qatar, Algeria, and countries in Africa. WATCH | Putin to Europe: If you want gas then open Nord Stream 2 × Russia curtailed gas supplies to Germany and other European nations via Nord Stream 1 pipeline starting June 2022. On September 29, amid intensifying warfare between Russia and Ukraine, the former closed down Nord Stream 1 pipeline indefinitely after a number of leaks were found in it and the parallel pipeline Nord Stream 2. WATCH WION LIVE HERE

Germany has no plans to dismantle Nord Stream 2 gas pipeline

Amidst rising energy crisis, protesters hit the street in Germany calling out the government for not doing enough to protect those with lower and average incomes. Watch the video for more details.