Germany's gross domestic product (GDP) contracted by 0.3 per cent in the January-March period, after shrinking by 0.5 per cent the previous quarter, an official estimate showed on Thursday. That means Germany — the world's fourth-largest economy — entered a technical recession.

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What is a technical recession?

Two back-to-back quarters of shrinking GDP is known as a technical recession.

Here are some of the key things to know about this big story:

  • The latest GDP figures from Germany are a blow to the country's government, which last month doubled its growth projections for 2023.
  • Germany's Finance Minister, Christian Lindner, said the latest GDP data showed "surprisingly negative signals" and that the country was losing growth potential among highly developed economies.
  • What has caused a technical recession in Germany? Elevated levels of inflation, a common problem for major economies around the globe, likely came in the way of economic growth for Germany, according to economists.
  • Economists also say the sticky inflation has hampered consumer spending in the country, given the prices in April being 7.2 per cent than the year before. GDP determines the total value of goods and services generated in a country. Some experts question whether the GDP figure alone is sufficient to measure economic prosperity given that it doesn't distinguish between types of spending.
  • The latest German data is in line with broad expectations of economists.
  • This week, the IMF predicted that the UK would avoid falling into recession this year. IT had earlier expected the UK to be one of the worst performing among the Group of Seven leading industrial nations. IMF Managing Director Kristalina Georgieva said: “We're likely to see the UK performing better than Germany, for example.”
  • The German finance minister said, referring to the IMF projections: "I don't want Germany to play in a league in which we have to relegate ourselves to the last positions." 
  • European shares stayed under pressure on Thursday, with the pan-continental FTSE 100 index extending taking a deeper hit after the news. The gauge dropped as much as 0.8 per cent in the second half of the session, having begun the day largely on a flat note. 
  • Germany's DAX index was on track to finish 0.1 per cent lower, having recovered much of its losses in the final minutes of trade after falling as much as 0.7 per cent during the course of the day.
  • Germany, the biggest economy in Europe, in one of the 20 countries that use the euro as a currency.

 With inputs from agencies