According to Fitch Ratings, Germany and Italy will enter recession by the end of the year as inflation continues to rise.
Although the downturn is not expected to be “severe,” James McCormack, Fitch’s head of sovereigns and supranationals, says that “recession is significant in and of itself.”
According to the latest figures from Germany’s Federal Statistical Office, inflation in the EU’s largest economy accelerated in February, rising 9.3% year on year and 1% month on month (Destatis). Despite government relief measures, rising food and energy prices have dealt a significant blow to the country’s economy.
In the final three months of 2022, the German economy contracted by 0.4% quarter on quarter. The contraction was greater than the previously estimated 0.2% drop in GDP.
Consumer prices in Italy, the EU’s third largest economy, rose 9.2% in February compared to the same period last year, down from a 10% increase in January, according to preliminary data from the country’s statistics agency ISTAT released on Thursday.
According to a report by the think tank Nomisma, purchasing power in the country has more than halved in the last year, with one in every seven Italians complaining that they earn less than they need to make ends meet. A quarter of those polled said they spent all of their money on necessities, and 26% of Italian households said they were worried about not making it to the end of the month.
According to Bloomberg, the United States is also at risk of a “modest” recession by the end of the year, with the “UK already probably there.”