(HNMO) – Investor confidence in Germany has fallen for the third consecutive month amid declining growth prospects, putting the European Union's (EU) largest economy at risk of recession.

The German economic sentiment index measured by the ZEW economic research institute fell from 4.1 in April to -10.7 in May. This is the first time the German index has fallen below zero in 2023.

The data comes amid a deeper-than-expected decline in manufacturing activity across most German industries. New orders for manufacturers fell 10.7% in March from the previous month, the sharpest decline since April 2020.

According to ZEW President Achim Wambach, financial market experts predict that the already unfavorable economic situation will worsen in the next six months, a scenario that could push the German economy into a mild recession.

Meanwhile, economists predict that German industry will stagnate instead of recovering as expected, thereby reducing the country's economic recovery prospects.

Previously, in a report published on May 16, the International Monetary Fund (IMF) warned that tighter financial conditions and the shock of rising energy prices had begun to affect Germany's growth in the short term.

The IMF also said that Germany's gross domestic product (GDP) is expected to be close to zero in 2023, before gradually increasing to 1% to 2% in 2024-2026, when the effects of tight monetary policy will fade and the economy will adjust to the energy shock.