Economists are declaring Germany as the “sick man of Europe” due to its weakened post-pandemic economy, while the US and UK show signs of renewed gross domestic product (GDP) growth.
Last week, America’s GDP grew by 2.1 percent for the second quarter of the year, according to the Bureau of Economic Analysis.
While this came in below expectations, it far outpaces the GDP growth of other G7 economies, such as Germany.
The heart of the European Union (EU) posted zero growth for the second quarter of 2023 as the economy contracted by 0.2 percent year-on-year.
It is not just the US economy that is besting Germany’s economy as the UK’s Office for National Statistics (ONS) revised its initial forecasts to estimate that GDP was 0.6 percent higher than before the pandemic.
Originally, the ONS estimated that the UK’s economy was still 1.2 percent smaller than its pre-pandemic size in the last three months of 2021.
With this change, the UK is likely no longer the worst-performing economy in Europe since lockdown.
Earlier this year, the International Monetary Fund (IMF) forecast that Germany’s economy would shrink in 2023.
If this prediction were to take place, this would be the global power and the only G7 country to see its economy contract this year.
The nation fell into a technical recession in the first quarter of 2023 and experienced two consecutive quarters of negative GDP growth.
Thomas Pugh, an economist at RSM, broke down why Germany’s economy is likely being outplaced by other European nations.
He explained: “Turns out the UK isn’t such a laggard after all. Revisions to GDP growth in 2020 and 2021 mean that rather than being about 0.2 percent smaller than its pre-pandemic size, the UK economy may actually be about 1.5 percent bigger.
“Admittedly, this would still mean that the UK is still near the back of the G7 pack, but it would be ahead of Germany and the gap between the UK and the rest of the G7 looks significantly smaller.”
ING’s global head of Macro and chief economist Carsten Brzeski contextualised the US economy’s performance against its European counterparts.
Mr Brezenski added: “Sure, the US economy has been holding up better than we thought. And yes, the eurozone economy grew again in the second quarter.
“Gradually retreating headline inflation should at least lower the burden on disposable incomes.
“And let’s be thankful for the build-up of national gas reserves in Europe, which should allow us to avoid an energy supply crisis this winter unless things turn truly arctic.
“But that’s about as upbeat as I can get. We still predict very subdued growth to recessions in many economies for the second half of the year and the start of 2024.”
