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German economy escapes recession by the narrowest of margins

Reuters  |  BERLIN 

By Paul Carrel

BERLIN (Reuters) - The German economy stalled in the final quarter of last year, narrowly escaping recession, as the fallout from global trade disputes and Brexit threatened to derail a decade-long expansion in Europe's economic powerhouse.

in Europe's biggest economy was unchanged for the quarter, the said on Thursday. A poll had forecast growth of 0.1 percent.

German companies are grappling with a cooling global economy and trade disputes triggered by U.S. It also faces the risk that Britain will leave the in March without an agreement on the terms of its withdrawal.

"got away with a black eye," said of the fourth-quarter numbers. "But the first quarter is not looking like it is going to be easy, either, as political uncertainties are weighing heavily on corporate confidence."

With growth unchanged in the fourth quarter, the economy escaped recession -- defined as two or more consecutive quarters of contraction -- after it shrank by 0.2 percent in the third quarter.

Germany's economy grew at its weakest rate in five years in 2018. Growth is forecast to shrink further to 1 percent this year, and the country faces a budget shortfall of around 25 billion euros by 2023.

The fallout from the trade disputes and concern about Brexit are weighing on business confidence, which fell for the fifth consecutive month in January.

Morale is also being depressed by weaker demand for German goods and services in China, the euro zone and emerging markets.

Furthermore, the government is concerned that technological innovation and the acquisition of German industrial know-how by foreign - particularly Chinese - companies could erode the on which much of Germany's wealth is built.

said last week the government might take stakes in key domestic companies to prevent foreign takeovers - a shift in policy he said was needed to safeguard Germany's prosperity.

Presenting an unusually gloomy outlook for Europe's biggest economy, said late last month the economic slump would last longer than earlier thought and more bad was coming.

With German growth stalling, the is likely put off plans to normalise policy any further, economists say, and it is more likely to provide further stimulus, rather than less.

"The upside from today's data is that it can hardly get worse," said.

"Economic fundamentals remain solid, and from here on, chances of a rebound are still much higher than chances of yet another disappointment," he added.

(Additional reporting by Rene Wagner, editing by Larry King)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 14 2019. 14:01 IST