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All economic forecasts at a glance
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The number of unemployed will temporarily increase slightly from 2.42 to 2.48 million in 2023. This is mainly due to the fact that the many refugees from Ukraine are recorded in the statistics due to their special status and do not immediately gain a foothold in the labor market. Unemployment should fall again to 2.41 million people in the coming year.
The state remains deep in the red. Its financing deficit will decrease only slightly in the current year to 2.2 percent of gross domestic product. Fiscal policy will initially remain expansive. In the coming year, the course will be tightened more significantly and the deficit will drop to 0.9 percent.
A large part of the losses in Germany’s overall purchasing power due to higher energy import prices – the so significant terms-of-trade losses – could be made up for by the end of 2024. As a result, the positive current account balance with other countries, which is important for Germany, rose again to 6.0 percent of economic output after temporarily falling to 3.8 percent last year.
The joint report is prepared twice a year by leading economic institutes. Four institutes are currently involved: The Ifo Institute for Economic Research in Munich, the Kiel Institute for Economic Research (IfW), the Institute for Economic Research Halle (IWH) and the Rheinisch-Westfälisches Institut für Wirtschaftsforschung in Essen (RWI).
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The leading economic research institutes have significantly raised their forecast for the economy and turned it into positive figures.
Instead of a decline in economic output of 0.4 percent, they now expect small growth of 0.3 percent for this year.
Above all, the persistently high inflation is causing concern. Despite the relief in energy prices, it remains exceptionally high at six percent for the year as a whole.
The leading economic institutes have revised their forecast for the economy sharply upwards and turned it into positive figures. Instead of a recession year, they now expect the German economy to grow slightly in 2023. High inflation continues to cause concern. It is true that inflation is slowing down because energy prices are no longer rising or are even falling after their jump a year ago. Basically, however, inflation remains high, the institutes wrote in their community forecast, which they presented on Wednesday in Berlin.
They are now expecting economic growth of 0.3 percent for the year as a whole. In autumn they had predicted a decline of 0.4 percent. This correction of 0.7 percentage points is unusually strong. This shows the high level of uncertainty about economic development as a result of the Corona crisis, the Ukraine war, many upheavals in the global economy and inflation.
Economy: The forecast of the institutes at a glance
“The economic setback in the winter half of 2022/2023 is likely to have been less severe than in
Autumn feared,” said Ifo economic chief Timo Wollmershäuser. However, inflation will only decline slowly, from 6.9 percent last year to a still unusually high 6.0 percent this year. “A noticeable drop in inflation rates will take some time to come, since the demand pull is unlikely to slow down for the time being,” says the report.
State aid and high wage increases boosted domestic demand. But they also kept the price pressure high. This price pressure from within Germany will only subside next year. Then the inflation rate will drop to 2.4 percent. This would put it back close to the European Central Bank’s (ECB) inflation target of two percent.
Basically, however, inflation remains higher. Excluding the base effect in energy prices, core inflation will only fall to 6.2 percent this year and 3.3 percent next year.
Compared to the autumn, the institutes have raised their forecast for the core inflation rate by 1.7 and 0.9 percentage points respectively. On the other hand, due to the more favorable development of energy prices, it lowered its forecast for the overall inflation rate by 2.8 percentage points for 2023, but increased it slightly by 0.2 percentage points for 2024.
The gross domestic product (GDP) should then increase more strongly again in 2024 with plus 1.5 percent. The institutes corrected their autumn forecast of 1.9 percent downwards noticeably.
The economists assessed the prospects for the labor market as positive: The number of people in employment is likely to rise again to a record – from 45.6 million in 2022 to 45.9 million in 2023 and for the first time 46.0 million in the coming year.
All economic forecasts at a glance
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The number of unemployed will temporarily increase slightly from 2.42 to 2.48 million in 2023. This is mainly due to the fact that the many refugees from Ukraine are recorded in the statistics due to their special status and do not immediately gain a foothold in the labor market. Unemployment should fall again to 2.41 million people in the coming year.
The state remains deep in the red. Its financing deficit will decrease only slightly in the current year to 2.2 percent of gross domestic product. Fiscal policy will initially remain expansive. In the coming year, the course will be tightened more significantly and the deficit will drop to 0.9 percent.
A large part of the losses in Germany’s overall purchasing power due to higher energy import prices – the so significant terms-of-trade losses – could be made up for by the end of 2024. As a result, the positive current account balance with other countries, which is important for Germany, rose again to 6.0 percent of economic output after temporarily falling to 3.8 percent last year.
The joint report is prepared twice a year by leading economic institutes. Four institutes are currently involved: The Ifo Institute for Economic Research in Munich, the Kiel Institute for Economic Research (IfW), the Institute for Economic Research Halle (IWH) and the Rheinisch-Westfälisches Institut für Wirtschaftsforschung in Essen (RWI).
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