Having just 'surpassed Japan' to rank third in the world, this economy faces the risk of falling into recession in the first quarter of 2024.

2024 is forecast to still be a "bleak" year for the economy, which is considered a European powerhouse.

The German Central Bank (Bundesbank) has just released a periodic report, showing that the country's economy may have fallen into recession in the first quarter of 2024. The reason is weak consumption growth and low demand for industrial products - they continue to create obstacles for the recovery of the world's third economy.

It is known that Germany's GDP in the fourth quarter of 2024 decreased by 0.3% compared to the previous quarter. In theory, a country will fall into recession when it has two consecutive quarters of negative growth.

Over the past year, Germany has struggled with rising fuel prices and rising borrowing rates. However, recent indicators, such as the ZEW Economic Research Institute's economic sentiment index or the producer price index (PMI), show that Germany has hit bottom. German PMI was only 41.6 points in March. This is the lowest level in 5 months.

But Bundesbank analysis shows that Germany cannot recover in the short term. 2024 is forecast to still be a gloomy year for the economy, which is considered a European powerhouse.

"The industrial sector is in a weak phase. No major breakthrough is expected from private consumption at the present time," the central bank said.

The number of new orders, both domestic and export, is currently at a low level. High interest rates are also weakening domestic demand, especially investment. Uncertainty on major issues, such as climate policy, also makes investors hesitant.

However, inflation is falling and nominal wages are also rising, so people's spending power is also improving. Inflation is forecast to continue to decline in the next few months but there may be some fluctuations, the Bundesbank said.

In addition, despite the gloomy economic outlook, businesses continue to retain employees and the unemployment rate here is forecast to only increase slightly in the next quarter.

According to Reuters, German businesses are struggling to recruit employees when the economy reopens after the pandemic. Therefore, they still keep workers even though there is no growth all year because the current cost of stabilizing human resources is still lower than when the economy prospered.

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