Japan, Germany and the United Kingdom are in technological recession in 2024

High global inflation, falling consumption and a shortage of qualified labor affect three of the world's six largest economies.

The planet's major economies face serious challenges in 2024. Recently, when Japan posted a 0.1% fall in GDP in the fourth quarter of the year, the dominant news was that the Asian country fell behind Germany in the rankings. Third largest economy in the world.

Japan recorded two consecutive quarters of contraction, setting up a technical recession. On the other hand, Germany did not step up and Japan gave up its place to a competitor.

Crisis in Europe and Asia

German GDP remained stagnant in the second and third quarters of 2024, contracting 0.3% at the end of the year. Add to this the United Kingdom, which ended the year in a technical recession, and we conclude that three of the world's six largest economies are stumbling.

This situation is partly explained by the increase in world energy prices after Russia invaded Ukraine, which raised already high global inflation. As inflation rises, less money is available to consumers, reducing growth prospects. For example, in countries like Japan, household consumption accounts for half of GDP.

Worrying situation

In Germany, the biggest evidence of falling consumption is the bankruptcy filing by KaDeWe, the century-old department store in Berlin that is in all the traditional travel guides. In the United Kingdom, Prime Minister Rishi Sunak has come under fire for failing to deliver on his promise to shore up the economy — his approval rating among Britons is just 28%.

Despite the worrying situation, the consensus is that consumption in these countries will recover by 2024. Encouraging investments in a period of high interest rates, high costs of raw materials and shortage of skilled labor is now a challenge.

A positive prediction for 2024

The International Monetary Fund (IMF) expects a modest recovery in 2024, with improvements of 0.9% in Japan, 0.6% in the United Kingdom and 0.5% in Germany.

These three countries are responsible for 5% of Brazil's exports, equivalent to 16 billion dollars a year. Therefore, the recovery of these rich economies will be good news for Brazil as well.

However, time will tell whether the efforts of these global powers will be sufficient to overcome the challenges they face and resume their growth trajectory.

Reference: Edition nº 2881 of VEJA, February 23, 2024.