Recession-hit Germany is facing a flurry of global headwinds: Goldman Sachs

Germany finds itself at a crossroads of global issues as it deals with an economic contraction, according to Peter Oppenheimer, chief global equity strategist and head of macro research EMEA at Goldman Sachs.

“The predicament that the economy is facing at the moment is really down to a number of factors,” Oppenheimer told CNBC Tuesday, with challenges in the manufacturing sector, a disappointing China reopening boost and higher energy costs contributing to the recession in Europe’s largest economy.

“It’s … not a deep recession but it’s obviously been more hit by obvious headwinds,” Oppenheimer said.

The comments reflect the latest projection by the Bundesbank, which estimated Monday that the German economy is likely to shrink this quarter thanks to slow private consumption and industry stuttering.

Germany officially fell into a technical recession in the first quarter of the year as GDP growth was revised from zero to -0.3%. 

Bleak forecasts for the German economy have prompted discussion as to whether the country is once again the “sick man of Europe,” a moniker that was first used to describe Germany in 1998 as the country navigated the costly challenges of a post-reunification economy.

But there are positives to be found in the German economy, Oppenheimer told CNBC. 

“The equity market has been holding up quite well and there are some bright spots, I think, in terms of activity in the economy,” he said, highlighting “opportunities” in Germany’s small and mid-sized companies, known as the Mittelstand.

Germany’s DAX index will see “fat and flat” returns going forward, Goldman Sachs predicted, in line with the rest of Europe.

“Over the short term, we could see a rebound in the DAX along with a broader range of China-related assets,” the bank said in a research note, but there is a risk that Chinese trade doesn’t provide as much of an economic boost as expected.

“Going forward, any rise in geopolitical tensions or curtailment in world trade would hinder the German recovery,” the note said.