Germany is on track for its first two-year recession since the early 2000s after its economy shrank in 2023 amid the impact of higher energy costs and weaker industrial demand. The German national statistics office said “multiple crises” affecting the economy had contributed to a 0.3% fall in gross domestic product (GDP) in 2023, compared with the previous year, as higher interest rates and elevated living costs took their toll. “Despite recent price declines, prices remained high at all stages in the economic process and put a damper on economic growth,” said Dr Ruth Brand, the president of the statistics office, at a press conference in Berlin on Monday. “The German economy did not continue its recovery from the sharp economic slump experienced in the pandemic year of 2020.” Germany’s economy was 0.7% higher in 2023 than in 2019, the year before the pandemic began. However, analysts said Europe’s largest economy was on track for another year of stagnant growth in 2024 at best, with a heightened risk of a second consecutive year of negative output. Carsten Brzeski, the global head of macro research at the Dutch bank ING, said: “There is no imminent rebound in sight and the economy looks set to go through the first two-year recession since the early 2000s. “We expect the current state of stagnation and shallow recession to continue. In fact, the risk that 2024 will be another year of recession is high.” After adjustment for calendar effects, the decline in economic performance in 2023 amounted to 0.1%, the statistics office said. It added that in the final quarter of last year the German economy shrank by 0.3%, compared with the third three months, when output had stagnated. Germany’s dominant industrial base, excluding construction, fell by 2% over the course of the year, as higher energy costs and dwindling demand at home and from abroad weighed on factory output. Reflecting the impact of higher energy bills and borrowing costs on consumers, household consumption fell 0.8% on the previous year, while government spending fell 1.7%. As well as having one of the worst performances among advanced economies last year, Germany is expected to experience one of the weakest performers in 2024, with EU forecasts published in November predicting growth of 0.8%. Experts said the country’s economy was in “permanent crisis mode” as supply chain frictions, persistent inflationary pressures, weaker global demand for manufactured goods and higher interest rates weighed on national output. Andrew Kenningham, the chief Europe economist at the consultancy Capital Economics, said: “The recent fall in inflation should provide some relief for households, but residential and business investment are likely to contract, construction is heading for a steep downturn and the government is tightening fiscal policy sharply. We forecast zero GDP growth in 2024.” Separate figures on Monday showed industrial production across the wider eurozone fell for a third consecutive month in November, with a slump of 0.3% on the month as declines in Italy and Germany were offset by growth in France and Spain.