German economy shrank 0.7% in Q4 amid resurgence of COVID | Economic news

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BERLIN (AP) — Germany’s economy shrank 0.7% in the fourth quarter of last year amid a surge in coronavirus infections and new restrictions, official figures showed Friday.

The quarter-on-quarter decline reported by the Federal Statistical Office follows two quarters of solid gains despite continued supply bottlenecks.

Gross domestic product rose 2.8% for the whole of last year, the bureau said, rebounding from a 4.6% plunge in 2020 when pandemic shutdowns were most severe. That figure was revised up slightly from the preliminary figure of 2.7% announced by the bureau earlier this month.

The government this week cut its growth forecast for this year to 3.6%, down from 4.1% in the German government’s previous forecast at the end of October. Economy Minister Robert Habeck told parliament on Friday that he expects growth of 2.3% in 2023.

The performance of the first quarter will be “inhibited, above all because of the corona pandemic and the restrictive measures but of course also because of the foreign policy situation – times of crisis are often times when the investment climate suffers” , Habeck said, alluding to tensions with Russia over Ukraine. “We expect the pre-crisis level to be reached in the second quarter of this year.”

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Germany is currently experiencing another spike in COVID-19 infections fueled by the highly contagious omicron variant.

However, on Tuesday, a closely watched survey showed that business confidence unexpectedly rebounded in January after a six-month decline.

This increase came on the back of a significant improvement in managers’ outlook for the next six months, even as their assessment of the current situation has deteriorated.

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