Despite the prolonged energy crisis, Europe’s war, and ongoing supply chain concerns, the German economy rose by 1.9% in 2022, thanks to increasing domestic demand following the release of COVID-19 restrictions.
Last year was dominated by fears that Germany’s economy, the largest in Europe and the fourth-largest in the world, would suffer if Russia cut off gas supplies. Despite the Kremlin’s steady reduction of gas deliveries to near-zero levels by the third quarter of the year, Germany’s economy grew every quarter.
“We have made the crisis bearable over the last year via decisive action,” said Robert Habeck, the minister of economy and climate action, Euractiv reported.
According to preliminary data, Germany’s GDP will increase by 1.9% in 2022, driven by a 4.6% increase in private spending over 2021.
As a result, the German economy surpassed earlier forecasts. In October 2022, the Ministry of Economic Affairs predicted annual growth of only 1.4%.
“Strikingly, even for 2022 Q4, GDP is estimated not to decline,” stressed Ben Moll, a professor of economics at the London School of Economics. The financial results ran contrary to doomsday scenarios by “industry bosses, bad economists, and politicians,” he wrote on Twitter.
Moll was a member of a committee of economists who advised the German government that it could do without Russian gas by the spring of 2022, which prompted heavy criticism from politicians and industry alike.
Aside from the surprisingly robust GDP growth, Germany avoided double-digit inflation in 2022, with early statistics showing it at 8.6% in December. Inflation is expected to remain stable in 2023, according to the government.
This, according to Habeck, is due to government action: “We have pulled together legislative packages in a short period, mobilized substantial sums of money to boost the economy and reduce the burden on households.”
Inflation fell to 7.9% overall for the year, which Habeck attributed to Germany’s multibillion-euro government programs aimed at lowering fuel prices.
On the other hand, Germany’s chances for 2023 might be less optimistic.
While a full prediction is scheduled on January 25, the government highlighted a 0.6% decrease in worldwide industrial production and a 1.6% dip in global commerce in October, which will affect Germany’s export-oriented economy.