There must be a slight flaw in the IMF’s crystal ball, causing the future prospects for the German economy to be refracted onto Britain. Remember a year ago when the IMF confidently predicted that the UK economy would suffer the worst performance of any major industrial nation and contract by 0.6 per cent in 2023, worse even than Russia? The Remain lobby had a field day, presenting it as ‘evidence’ that our departure from the EU had put us in the international slow lane.
It wouldn’t have been such a bad forecast, it turns out, had it been for Germany. The German economy, it has been announced today, shrank by 0.3 per cent last year – worse, it looks like, than any other large country. Industrial production, hit by high energy costs, contracted by 2 per cent, but it wasn’t just that. Household consumption fell by 0.8 per cent and government spending, hit by the end of Covid-related funding, fell back by 1.7 per cent.
There is little room for schadenfreude over this side of the Channel. While Britain has so far avoided recession (which was also predicted by the Bank of England) and last week’s GDP figures showed the economy rising by 0.3 per cent in November, the stagnation of the UK economy is there for all to see. Output in the three months to November, indeed, was minus 2 per cent. But it is painfully clear that whatever is holding back the UK economy is also holding back the eurozone, and Germany in particular. Europe is becoming the global laggard.
Neither do Germany’s prospects look great in the near future.