Weakness of the German economy THE ECONOMY SUFFERED A TECHNICAL RECESSION DURING THE WINTER MAINLY DUE TO THE IMPACT OF THE ENERGY CRISIS GDP fell by 0.3% quarterly in January-March 2023, although it will regain positive rates in the second half of the year Deterioration of business expectations For 2023 as a whole, a y-o-y decline of -0.5% is forecast, due to a decline in public and private consumption Notable moderation in inflationary pressures to 2% by end-2023 Resilience of the labour market, although the unemployment rate rose slightly in Jun.23 to 5.7 % Target of fiscal consolidation and sustainable public finances CRITICAL ASSESSMENT OF SPENDING, PRIORITIZATION OF ITEMS AND ONLY NEW STRUCTURAL SPENDING IF THERE IS EFFECTIVE STABLE FUNDING IN RETURN. THE DRAFT 2024 BUDGET ENVISAGES A CUT IN PUBLIC SPENDING OF MORE THAN 30 BILLION EUROS Oxford Economics expects deficits below 2% in 2024 and around 1% in 2025

1. 44
46
48
50
52
54
56
84
89
94
99
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Business Climate Ifo
Composite PMI (right axis)
-1
0
1
2
3
4
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23*
Q3
23*
Q4
23*
Q1
24*
Q2
24*
Q3
24*
Q4
24*
quarterly y-o-y
Technical recession
-3.1
-1.6 -0.9
1.4
-4.4
-3.7
-2.6 -2.3 -1.8
-1.2
2000-04
2005-09
2010-14
2015-19
2020
2021
2022
2023*
2024*
2025*
Public debt
Economic situation in Germany and forecasts
ECONOMY
In data
Weakness of the German economy
THE ECONOMY SUFFERED A TECHNICAL RECESSION DURING THE WINTER MAINLY DUE TO THE IMPACT OF THE ENERGY CRISIS
Source: Círculo de Empresarios based on Oxford Economics,
Bundesministerium der Finanzen, Ifo Institute and Markit, 2023.
ANNUAL INFLATION
2023*
5.6%
1.3 pp less than in 2022
5.6%
UNEMPLOYMENT RATE
2023*
labour force, 3 tenths more than
in 2022
GDP GROWTH
2023*
-0.5%
y-o-y and 0.9% in 2024*, far from
1.9% in 2022
GOVERNMENT DEFICIT
2023*
-2.3%
of GDP, 3 tenths less than in 2022
and 1.4 pp lower than in 2021
* Forecasts
Target of fiscal consolidation and sustainable public finances
CRITICALASSESSMENT OF SPENDING, PRIORITIZATION OF ITEMS AND ONLY NEW STRUCTURALSPENDING IF THERE IS EFFECTIVE STABLE FUNDINGIN
RETURN. THE DRAFT 2024 BUDGET ENVISAGES A CUT IN PUBLIC SPENDING OF MORE THAN 30 BILLION EUROS
For 2023* as a whole, a y-o-y decline of -0.5% is forecast,
due to a decline in public and private consumption
% GDP y-o-y change
Notable moderation in inflationary pressures to 2% by
end-2023
% y-o-y change
Resilience of the labour market, although the
unemployment rate rose slightly in Jun.23 to 5.7 %
Unemployment rate % labour force
Oxford Economics expects deficits below 2% in 2024*
and around 1% in 2025 *
Budget balance % GDP
▼ Inflation
• Moderation of energy and food prices
• Reducing stress in supply chains
• Policy measures approved
• Favorable base effects
Deterioration of business expectations
Left axis: Business climate Index 2015 = 100
Right axis: PMI > 50 activity expansion and < 50 contraction
Q1 23: ▼deficit to -2.2% (from -3.5% in Q4 22) due to ▼public consumption, although it remains
high by historical standards
54.6
63.9
64.6
61.3 60.8 61.5
2019 2020 2021 2022 2023* 2024*
% GDP
Economic risk valuation
Oxford Economics
Scores between 1 and 10, with 10 representing the highest risk
Global risk
2.3
over 10
6th among 164 countries
(1st being the best)
By pillars …
In the long term…
% y-o-y change
GDP fell by 0.3% quarterly in January-March 2023, although
it will regain positive rates in the second half of the year
% GDP change
1.3
0.7
1.3
0.9
0.3 0.1
0.9
1.5
2012-26 2017-21 2022-26 2027-31
GDP Productivity
8.2
2.0
5.7 2.6
-1
1
3
5
7
9
Q1
21
Q2
21
Q3
21
Q4
21
Q1
22
Q2
22
Q3
22
Q4
22
Q1
23
Q2
23*
Q3
23*
Q4
23*
3,0
2,0
2,4
3,1
1,0
0
2
4
6
8
10
Market demand
Market cost
Exchange rate
Sovereign
credit
Trade credit
Germany
Advanced economies