In a note overloaded "pessimism"Germany’s central bank warns "Deflation rates are on the rise"

Germany’s central bank, the Bundesbank, said in its monthly bulletin that Germany has entered a phase of “clear, generalized and sustained decline” in its economy amid rising energy costs for companies.

In a note marred by “pessimism,” the Bundesbank wrote that the German economy was “increasing deflation rates,” mainly driven by “general economic supply conditions, especially energy supply,” which had deteriorated to a significant extent since the Ukrainian crisis, France Press reported. .

The Bundesbank explained that inflation, which continues to rise and approached 8% in August, as well as uncertainty about the future of energy supplies and prices, will hurt “energy-consuming” sectors that depend, in particular, on gas, affecting their exports. and investment, as well as “private consumption and the service providers” that depend on them,” as after cutting off Russian gas supplies to Germany, which was 55 percent dependent on it before the Ukrainian crisis, the central bank warned that supplies would be “extremely difficult to coming months.”

The Bundesbank also expected “gross domestic product to fall significantly in the fourth quarter” and “most likely in the first quarter of next year”, after recording a modest 0.1% growth in the second quarter of this year, as it is believed that the economy is in a technical recession after two consecutive quarters of regression.

And German Central Bank President Joachim Nagel made similar predictions in early September, pointing to the “possibility” of entering a state of deflation at the end of the year and early 2023, where he noted that “there are a number of elements” that point to this scenario.

In the same context, the IFO institute, one of Germany’s largest research institutes, last week expected a technical contraction in the first quarter of 2023, with GDP falling by 0.4% after an expected decline of 0.2% in the fourth quarter. 2022.

Source: AFP

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