The chief economists of the German banks see the prospects for the economy in Germany as relaxed to positive, despite the recent unrest in the banking sector.
“The recovery is coming. Winter is over,” said Holger Schmieding, chief economist at Berenberg Bank, on the spring forecast of the Association of German Banks. Germany will avoid a real recession.
The banking association expects the economy to stagnate in 2023 with inflation still at 5.9 percent. In 2024, growth will increase to 1.3 percent and inflation will fall to three percent.
Positive economic forecast: Despite the recent turbulence in their sector, the banks are looking at the German economy with calm or even optimism. “The recovery is coming. The winter is over. The economy is also springing,” said the chief economist at Berenberg Bank, Holger Schmieding, on Wednesday Spring forecast of the Federal Association of German Banks.
The Banking Association expects stagnation for 2023 as a whole, with inflation still at 5.9 percent. In the coming year, economic growth will increase to 1.3 percent and inflation will drop to three percent. “The upswing won’t be really strong, but it’s coming,” said Schmieding.
The economic forecast is based on the assessments of 15 chief economists of German banks. The banking turmoil following the collapse of three US regional banks and the takeover of Credit Suisse by UBS did not prompt them to downgrade their forecast. Contrary to what was feared in autumn, Germany will avoid a real recession. At most, a technical recession with a slight decline in gross domestic product in the first quarter is possible.
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Banking crisis without major consequences for the economy
The economy will continue to be burdened by high energy prices and high inflation. The rate hikes by the European Central Bank dampened the economy. Above all, there is a strong braking effect.
The economy is supported by the robust labor market and the high investment needs of companies for the transformation of the economy. The most important impetus should come from the euro zone, since the effects of the recovery in China and an impending recession in the USA would roughly cancel each other out.
The situation of the banks cannot be compared with the financial crisis of 2008, said Schmieding. However, they could lead to banks restricting lending somewhat on their own initiative. There is no threat of a credit crunch in which companies find it difficult to obtain credit for their investments. “But if the market tightens financing conditions, then central banks don’t have to,” said Schmieding. The banking association therefore assumes that the interest rate peak will be somewhat lower, but that interest rates will remain high for longer.
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