The German economy is struggling with the consequences of the war in Ukraine – Deutsche Wirtschafts Nachrichten

The German economy has struggled to cope with the consequences of the conflict in Ukraine.

This information is reported by Deutsche Wirtschafts Nachrichten.

This year, Germany’s economy is expected to shrink by 0.6%. Compared to the first quarter of the previous year, the GDP has fallen by 0.5% and inflation has reached an unprecedented level of 6.1%. Experts warn that there is no imminent improvement in the situation.

German businesses are looking pessimistically towards the future, the publication continues. Entrepreneurs fear that the period of economic difficulties will persist and they won’t be able to secure future investments. Many companies are forced to reduce production or even halt it completely, leading to income losses and job cuts.

Consumers are also suffering due to the current situation. In September 2023, the consumer climate index reached -25.6 points and a further decrease is expected in October. Alongside inflation, the decline in consumption is attributed to high energy prices. After the cessation of supplies from Russia, citizens in Germany have to pay more for gas, oil and electricity, significantly limiting their purchasing power.

Moreover, the Ukrainian conflict has exacerbated supply chain issues that have existed since the beginning of the COVID-19 pandemic. Shortages of essential raw materials often occur since Russia and Ukraine are their major producers. This, in turn, leads to production stoppages at factories and a reduction in supply in the market. In total, 77% of companies in Germany have reported suffering from supply chain problems.

These problems are already diminishing Germany’s attractiveness as a place to do business, the publication emphasizes. Unfortunately, the situation is not expected to improve in the near future. At the same time, the number of business bankruptcies is rapidly increasing. In 2023, 13,993 companies have already filed for insolvency. Compared to the same period in the previous year, in August 2023, the number of such firms increased by 13.8%, and in July, it increased by as much as 23.8%.

“The number of bankruptcies reflects the economic situation in Germany. Enterprises are under pressure and many of them won’t survive,” said Stefan Koots, Chief Economist at the Kiel Institute for the World Economy.

The automotive industry is particularly affected by the consequences of the conflict and high energy prices and supply chain issues are also impacting the construction sector and retail trade.

Economic indicators suggest that Germany is facing significant challenges and there is no immediate improvement on the horizon. The economy will continue to grapple with the aftermath of the Ukrainian conflict and global uncertainty. It will take time before it returns to a path of stable growth.