German Economy Faces Slowdown Due to West Asian Tensions

Kathmandu. The German government has warned that Germany's economic growth will slow sharply in the second quarter due to rising energy costs, supply chain disruptions, and declining consumer and business confidence amid rising tensions in West Asia.

In its monthly report released on Friday, Germany's Federal Ministry for Economic Affairs and Energy stated that rising inflation, problems in the supply system, and growing uncertainty are weakening the confidence of businesses and consumers.

According to the ministry, Germany's future economic situation will largely depend on the geopolitical situation in West Asia. The report states that even if tensions ease somewhat, the impact on energy and raw material prices and supply chains is likely to persist for a long time.

Since tensions began to rise in West Asia at the end of February, the impact of rising energy costs and supply disruptions has directly affected German consumers. Inflation rose to 2.9 percent in April, the highest level since January 2024. Energy prices increased by 10.1 percent year-on-year during this period, and a significant increase in food prices was also reported.

The ministry noted that overall economic sentiment has weakened in recent weeks, indicating a significant decline in consumer activity in the second quarter.

This situation is contrary to the first quarter. According to initial government data, private and public spending growth expanded the German economy by 0.3 percent in the first quarter.

The German government stated that the continued weakness of the industrial sector is also hindering economic recovery. Although factory orders showed some increase in March, the ministry described it as a temporary effect linked to pre-purchases due to West Asian tensions.

According to the report, Germany's industrial production has been declining for four consecutive quarters, and recent economic indicators show no clear signs of improvement in the second quarter, the ministry said.