• Sat. Jun 3rd, 2023

Germany’s gambling industry could suffer as the recession hits the country

Posting date: May 26, 20,23, 9:45h

Last updated: May 26, 2023 at 09:45h
As Germany attempts to expand its regulated gambling market, it is facing a new challenge. The global economy, despite attempts to deny this fact, is in a recession. This is beginning to manifest itself here as well. Although some believe the gaming industry is recession-proof, recent studies refute that assertion.

The German Flag of Unity flies in the national colors in front of the Reichstag Building. Gambling industry could be affected by the recession in the country. (Image: German Bundestag)

The German Flag of Unity flies in the national colors in front of the Reichstag Building
Analysts assert that Russia’s natural gas cuts following the attack on Ukraine had a severe impact on the largest economy in Europe. According to official statistics, Germany’s economy also experienced a 0.3% decline in the first three months of this year. This follows a 0.5% drop in the fourth quarter of 2022. When an economy shows dips for two consecutive quarters, according to most economic definitions, it’s considered to be in a state of recession.

Similar drops have been seen in the UK and the US, where analysts are keeping a close eye on Las Vegas traffic. While Germany’s economic decline isn’t yet at a critical level, research shows that gambling is often one of the first things to go when consumers have to cut spending.

Approach With Caution

The correlation between a strong economy and a strong gambling market is no secret, despite the recession-proof claims. Periodically, studies have been conducted that show the connection between the two.

In the Netherlands, in 2012, Csilla Horvath and Richard Paap carried out a study that showed that from 1959 to 2010 when the economy was strong, gambling was also. However, when it dropped, so did the gaming industry.

Curiously, the trend doesn’t apply to all gambling sectors. Lottery sales do not follow the same roller coaster of economic ups-and-downs, according to multiple studies. Andreas Scheuerle is an analyst with the German financial institution DekaBank. He said that the German economy was being dragged down by consumers because of high inflation. The rise in inflation in Germany in April was 7.2%. This is higher than the eurozone’s average, but lower than 8.7% in the UK. Furthermore, there is a greater level of stringency in industry regulations as businesses feel the impact of elevated energy costs.

Destatis, the official statistics agency, previously projected a lack of growth for the initial quarter of this year, implying that recession would be evaded. Yet, stability remains in peril due to mounting prices.

Despite Germany’s significant dependence on Russian energy, the recession was not as harsh as initially forecasted. The mild winter and the resurgence of China’s economy played a crucial role in mitigating the influence of exorbitant energy costs.

Analysts note that while there was an increase in private sector investment and exports, it did not suffice in bringing Germany out of the danger zone for a recession. The Bundesbank, Germany’s central bank predicts a more robust growth rate in the April-June period. The decrease in business delays, which previously affected consumer spending, is the reason for this. Germany may be able to weather the storm if the recent UK economic turmoil is anything to go by. Some companies’ revenue has increased over the last year. Even though online gaming is still gaining traction in Germany, there’s hope. The German Sportsbetting Association has yet to respond to requests for information.

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