«It has already arrived in Germany»- Corriere.it

Not that there is a risk of recession, Germany has arrived. Thus the Minister of Economy, Giancarlo Giorgetti, replied to those who asked him about risk of recession in view of the new increases foreseen by the ECB. The German economy slipped into recession during the winter, with the gross domestic product falling 0.3% in the first three months of the year compared to the previous quarter. And now, despite the latest Istat forecasts on GDP being positive, there are also fears for Italy given the strong trade between the economies of the two countries.

The causes of the recession in Germany and the forecasts

According to the German national statistics office, the main cause of the reduction in GDP in Germany in the first quarter of 2023 was a negative trend in household consumption, which decreased by 1.2 percent compared to the previous quarter due to the ‘inflation. The German economy will contract more than expected this year, as inflation affects private consumption, Timo Wollmershuser, head of economic research at the Ifo, explained in recent days, presenting his forecasts. German GDP is expected to decrease by 0.4% in 2023, more than the 0.1% forecast by the Ifo Institute in March. The economic institute also cut its GDP growth forecast for Germany in 2024 to 1.5%, down from 1.7% previously forecast.

The value of trade between Italy and Germany

The slowdown in Germany, the driving force of Europe and Italy’s first commercial partner, could have repercussions on the other major European economies and in particular the Italian one. Berlin is the first market for our exports, which reached 77.5 billion euros (+15.8%) in 2022, while imports recorded growth of 20.2%, rising to 91 billion. Commercial exchange between Italy and Germany reached a total value of 168.5 billion euros (+18.2%). Germany’s weakness could therefore infect the Italian industries most integrated into global value chains and the most dynamic regions, especially in Northern Italy. For now, Italy has dodged the contagion and Istat forecasts for June see Italian GDP growing both in 2023 (+1.2%) and in 2024 (+1.1%), albeit slower than in 2022. The positive signals coming from the estimate of the quarterly economic accounts for the first quarter of 2023 led to an upward revision of the GDP estimate for 2023 by +0.8 percentage points. Forecasts that should bode well, but the words of the Economy Minister suggest that the danger of recession has not escaped at all.